SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported):
May 8, 1998
SUNBURST ACQUISITIONS II, INC.
Colorado
(State or other jurisdiction of incorporation or organization)
0-22661
(Commission File No. )
84-1388857
(I.R.S. Employer
Identification No.)
5599 San Felipe, Suite 620
Houston, Texas
(Address of principal executive offices)
77056
(Zip Code)
Registrant's telephone number, including area code: (713) 850-9993
4807 South Zang Way, Morrison, Colorado, 80465
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(Former address, if changed since last report)
<PAGE>
INFORMATION INCLUDED IN THIS REPORT
Item 1. Changes in Control of Registrant.
On May 8, 1998, Registrant entered into a asset acquisition transaction,
more fully described in Item 2 below, in which Stephen Noser and Samuel Skipper
acquired 77.7% of the voting rights of Registrant and in the process became the
sole two directors of Registrant. In addition, Mr. Noser became the President,
Secretary, and Assistant Treasurer of the Registrant, and Mr. Skipper became the
Chairman of the Board and Chief Executive Officer of Registrant. Previous to
the transaction, Michael R. Quinn and Jay Lutsky controlled 74.37% of the votes
of Registrant and acted as Registrant's directors and executive officers.
In the transaction, Mr. Noser subscribed for 1,000,000 shares of
Registrant's common stock, no par value ("Common Stock") for a total
consideration of $1,000 and received 250,000 shares of Registrant's class B
preferred stock ("Class B Preferred Stock") upon becoming a director. The Class
B Preferred Stock is not convertible but has 100 votes for every share of Class
B Preferred Stock. Mr. Noser also owns 50% of Vector Energy Corporation, a Texas
corporation ("Vector"), which received 333,333 shares of Common Stock in
exchange for assets that Vector transferred to Registrant. Mr. Noser owns 35.9%
of the total votes of Registrant.
Also in the transaction, Mr. Skipper subscribed for 5,433,334 shares of
Common Stock for a total consideration of $1,000 and received 250,000 shares of
Class B Preferred Stock upon becoming a director. Mr. Skipper owns 41.8% of the
total votes of Registrant.
In connection with this transaction, Registrant changed its principal place
of business and principal telephone number from 4807 South Zang Way, Morrison,
Colorado, 80465, (303) 979-2404, to its present location and phone number at
5599 San Felipe, Suite 620, Houston, Texas, 77056, (713) 850-9993.
Item 2. Acquisition or Disposition of Assets.
As mentioned in Item 1, on May 8, 1998, Registrant entered into an asset
acquisition transaction by which Registrant acquired substantially all of its
present operating assets. The transaction consisted of a Asset Purchase
Agreement executed by Registrant and Vector under which Vector transferred all
or substantially all of its assets to Registrant, including its rights to two
asset purchase agreements with Lisbon Development Company. L.L.C., a Texas
limited liability company ("Lisbon"), and Taurus Operating, Inc., a Texas
corporation ("Taurus") dated March 23, 1998 ("Lisbon Contract") and March 31,
1998 ("Taurus Contract"), respectively.
Other than the rights to the above mentioned asset purchase contracts with
Lisbon and Taurus, Vector's assets acquired by Registrant were nonoperated
working interests and royalties in approximately 80 producing oil and wells
located primarily in Oklahoma and Kansas. These working interests and royalty
interests accounted for approximately 2% to 3% of the aggregate value of the
Vector assets being transferred to Registrant. Registrant also acquired from
Vector a wholly owned subsidiary of Vector, Vector Exploration, Inc., a Texas
corporation ("Vector Exploration"), which then became a wholly owned subsidiary
of Registrant. Vector assigned its rights to the Lisbon Contract to Vector
Exploration previous to Registrant's acquisition of Vector Exploration. In
exchange for these assets and the rights under the contracts, Vector received
333,333 shares of Common Stock.
Pursuant to the asset acquisition transaction, Registrant, through its
newly acquired wholly owned subsidiary Vector Exploration, exercised the rights
under the Lisbon Contract by which Vector Exploration acquired 13 producing oil
and gas wells located in East Texas and North Louisiana. These assets currently
are held in Registrant's wholly owned subsidiary Vector Exploration. In
exchange for these Lisbon assets, Vector Exploration delivered to Lisbon 30,000
shares of Registrant's class AA 6% cumulative convertible preferred stock
("Class AA Preferred Stock") and assumed $6.1 million in secured debt and
$800,000 in accounts payable. The secured debt assumed by Registrant is a
credit facility secured by the production on the acquired producing properties
that allows Registrant access to a line of credit of up to $10 million with a
national bank. These Lisbon liabilities, just as the Lisbon assets, are held by
Registrant's wholly owned subsidiary Vector Exploration The Class AA Preferred
Stock is convertible and votes at a rate of 333.33 to one share of Class AA
Preferred Stock.
Registrant also exercised its assigned rights under the Taurus Contract,
which were assigned directly to Registrant, and acquired the Westbrook Field
located in Mitchell County, Texas. In exchange for this asset, Registrant
issued to Taurus 710,400 shares of Common Stock.
In connection with the above transaction, Registrant additionally issued
1,833,333 shares of Common Stock and a warrant to purchase an additional
1,000,000 shares of Common Stock at an exercise price of $.03 per share to
subscribers in exchange for an aggregate consideration of $501,000.00.
Item 7. Financial Statements and Exhibits.
Registrant will file its financial statements and pro forma financial
information in an amendment hereto within 60 days of the date of this filing.
Exhibit 2.01 Asset Purchase Agreement between Registrant and Vector.
Exhibit 2.02 Lisbon Agreement
Exhibit 2.03 Taurus Agreement
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: May 23, 1998.
SUNBURST ACQUISITIONS II, INC.
By: /s/ Stephen Noser
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Stephen Noser, President
<PAGE>
EXHIBIT 2.01
ASSET PURCHASE AGREEMENT
This Agreement is made and entered into this _____ day of May, 1998, by and
between Sunburst Acquisitions II, Inc., a Colorado Corporation (hereinafter
"Sunburst"), and Vector Energy Corporation, a Texas corporation (hereinafter
"Vector").
This Agreement sets forth the terms and conditions upon which Vector is
selling to Sunburst and Sunburst is purchasing and acquiring from Vector certain
operating properties, contract rights, and capital stock of a subsidiary
corporation.
NOW THEREFORE, in consideration of the foregoing, and in consideration of
the mutual covenants and promises hereinafter set forth, it is agreed as
follows:
1. Sale of Business Assets. On the terms, and subject to the conditions
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herein set forth, Vector shall convey, transfer, assign and deliver to Sunburst,
on a going concern basis, and Sunburst shall acquire and accept from Vector all
of the operating assets, contract rights and stock described in Exhibit A
attached hereto and incorporated herein by this reference.
2. Purchase Price. On the terms and subject to the conditions herein set
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forth, Sunburst shall, on the closing date:
2.01 Issue and deliver to Vector 19,710,000 shares of its authorized, but
previously unissued shares of common stock, to be registered in the name of
Vector or its designees;
2.02 Assume certain liabilities of Vector and of its wholly-owned
subsidiary, Vector Exploration, Inc., in accordance with the Asset Transfer
Agreement dated March 23, 1998, between Lisbon Development Company, LLC, and
Vector.
2.03 Sunburst shall assume and agree to be bound by all of the terms and
conditions of the purchase and sale agreement dated March 31, 1998, by and
between Vector, and Taurus Operating, Inc., pursuant to which Vector agreed to
acquire certain properties and assets owned by Taurus Operating, Inc., referred
to as the Westbrook Field.
3. Representations and Warranties of Vector. Vector represents and
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warrants as follows:
3.01 Existence. Vector is a corporation duly organized, validly existing,
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and in good standing under the laws of the state of its incorporation, and is
duly qualified to do business in the states in which its properties are located.
3.02 Authorization. Vector has all authority necessary to enter into this
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Agreement, to perform all its obligations hereunder, and to convey, transfer or
assign all of the assets and properties described herein free and clear of all
liens, claims and encumbrances other than those to be specifically assumed by
Sunburst, as listed in Exhibit B attached hereto. This Agreement has been duly
executed and delivered on its behalf, and at the Closing all documents and
instruments required hereunder will have been duly executed and delivered. This
Agreement, and all such documents and instruments shall constitute legal, valid,
and binding obligations enforceable in accordance with their respective terms,
except to the extent enforceability may be affected by bankruptcy,
reorganizations, insolvency, or similar law affecting creditors' rights
generally.
3.03 Power. Vector's execution, delivery, and performance of this Agreement
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and the transactions contemplated hereby will not: (i) violate or conflict with
any provision of its certificate of incorporation, by-laws, or other governing
documents; (ii) result in the breach of any term or condition of, or constitute
a default or cause the acceleration of any obligation under any agreement or
instrument to which it is a party or by which it is bound; or (iii) violate or
conflict with any applicable judgment, decree, order, permit, law, rule, or
regulation.
3.04 Brokers. Vector has incurred no liability, contingent or otherwise,
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for brokers' or finder's fees in respect of this transaction, for which Sunburst
shall have any responsibility whatsoever.
3.05 Further Distribution. Vector (i) has such knowledge and experience in
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business and financial matter that it is capable of evaluating the merits and
risks of entering into and of carrying out its obligations in connection with
the transactions contemplated herein; (ii) has received to date all information
concerning Sunburst and other information relating to this Agreement which it
requested; and (iii) is able to bear the economic risk of ownership of the
securities of Sunburst for an indefinite period of time. Further, Vector
acknowledges that Sunburst is relying upon the representations contained in the
foregoing sentence and that absent such representations, the proposed
transaction would not be entered into and this Agreement would not be executed
and delivered by Sunburst.
3.06 Effective Agreement. The execution, delivery, and performance of this
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Agreement by Vector and the consummation of the transactions contemplated hereby
do not require the consent, waiver, approval, or authorization of any person or
public authority; do not result in a violation of any material breach of any
law, rule, or regulation applicable to Vector, and do not conflict with or
result in a breach of any of the governing instruments of Vector or, with or
without the giving of notice and/or the passage of time, any mortgage, deed of
trust, license, indenture, or other instrument or agreement, or any order,
judgment, or other restriction of any kind or character to which Vector is a
party.
3.07 Litigation. Vector is not a party to or threatened by any litigation,
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proceeding, or controversy before any court, governmental body, or
administrative agency which would have a Material Adverse Effect on the
transactions contemplated under this Agreement.
3.08 Compliance with Laws. The execution and performance of this Agreement
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by Vector does not violate any law or regulation of any jurisdiction or
governmental body or agency and does not require approval of, or filing with,
any governmental body or agency.
3.09 Representations, Statements and Certificates. No representation
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by Vector, nor any statement or certificate furnished or to be furnished by
Vector pursuant to this Agreement, or in connection with the transactions
contemplated herein, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained therein not misleading.
4. Representations and Warranties of Sunburst. Sunburst represents and
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warrants as follows:
4.01 Organization, Capitalization, etc.
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(a) Sunburst is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Colorado, and as of the Closing
Date will be qualified to do business in the State of Texas, but will not be
qualified in any other state.
(b) The authorized capital stock of the Company consists of
100,000,000 shares, no par value common stock and 20,000,000 shares of preferred
stock of which 2,190,000 shares of common stock and no shares of preferred stock
are validly issued and outstanding, fully paid and non-assessable.
(c) Sunburst has the unqualified right to issue the common shares to
Vector as contemplated by the terms of this Agreement, and upon consummation of
the transactions contemplated by this Agreement, Vector will acquire good and
valid title to the Shares, free and clear of all liens, claims, options,
charges, and encumbrances of whatsoever nature.
4.02 Authority; No Violation. The execution and delivery of this Agreement
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by Sunburst and the consummation of the transactions contemplated hereby have
been duly authorized. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will constitute a
violation or default under any term or provision of the Articles of
Incorporation or bylaws of Sunburst, or of any contract, commitment, indenture,
other agreement or restriction of any kind or character to which Sunburst is a
party or by which Sunburst is bound.
4.03 Financial Statements. Sunburst has delivered to Vector audited
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financial statements for the period ending April 30, 1997, and which are
attached to the Company's First Amended Form 10-SB filed with the Securities and
Exchange Commission (the "Commission"). In addition, Sunburst has delivered to
Vector its unaudited financial statements for the periods ending July 31, 1997,
October 31, 1997, and January 31, 1998, which are attached to its Form 10-QSB
filed with the Commission for each such period. All such financial statements
are true and correct, and a fair and accurate presentation of the financial
condition and assets and liabilities (whether accrued, absolute, contingent, or
otherwise) of Sunburst as of the date thereof in accordance with generally
accepted principals of accounting applied on a consistent basis.
4.04 Tax Returns. Sunburst has duly filed all tax reports and returns
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required to be filed by it and has fully paid all taxes and other charges
claimed to be due from it by federal, state, or local taxing authorities
(including without limitation those due in respect of its properties, income,
franchises, licenses, sales, and payrolls); there are no liens upon any of
Sunburst's property or assets; there are not now any pending questions relating
to, or claims asserted for, taxes or assessments asserted against the Company.
4.05 Undisclosed Liabilities. Sunburst has no liabilities or obligations of
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any nature, whether absolute, accrued, contingent, or otherwise and whether due
or to become due, and does not know or have any reasonable ground to know of any
basis for the assertion against it of any liability or obligation of any nature
whatsoever.
4.06 Litigation. There are no actions, proceedings, or investigations
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pending or, to the knowledge of Sunburst, threatened against it, and Sunburst
does not know or have any reason to know of any basis for any such action,
proceedings, or investigation.
4.07 Disclosure. Sunburst has disclosed to Vector all facts material to its
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assets, prospects, and business. No representation or warranty by Sunburst
contained in this Agreement, and no statement contained in any instrument, list,
certificate, or writing furnished to Vector pursuant to the provisions hereof or
in connection with the transaction contemplated hereby, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading or
necessary in order to provide Vector with proper information as to Sunburst and
its affairs.
4.08 SEC Filings. Sunburst is a reporting company under the Securities and
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Exchange Act of 1934 (as amended) and has filed on a timely basis all reports
required to be filed with the Securities and Exchange Commission.
5. Closing.
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The closing under this Agreement shall take place at 5599 San Felipe, Suite
620, Houston, Texas, at 10:00 a.m. on May 8, 1998, or at such other date or time
as the parties may mutually agree in writing.
6. Conditions Precedent to Closing by Sunburst.
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The obligations of Sunburst to purchase the assets under this Agreement are
subject to the satisfaction, at or before the closing, of all the conditions set
out below in this paragraph 6. Sunburst may waive any or all of these conditions
in whole or in part without prior notice; provided, however, that no such waiver
of a condition shall constitute a waiver by Sunburst of any of its other rights
or remedies, at law or in equity, if Vector shall be in default of any of its
representations, warranties, or covenants under this Agreement. The conditions
are as follows:
6.01 Except as otherwise permitted by this Agreement, all representations
and warranties by Vector in this Agreement or in any written statement that
shall be delivered to Sunburst under this Agreement be true on and as of the
closing date as though made at that time.
6.02 Vector shall have performed, satisfied and complied with all
covenants, agreements and conditions required by this Agreement to be performed
or complied with by it on or before the closing date.
6.03 During the period from the date hereof to the closing date, there
shall not have been any material adverse change in the financial condition or
the results of operations of Vector, and Vector shall not have sustained any
material loss or damage to its assets, whether or not insured, that materially
affects its ability to conduct a material part of its business.
6.04 Sunburst and its counsel, accountants and other representatives shall
have full access during normal business hours to all properties, books,
accounts, records, contracts and documents of or relating to Vector. Vector
shall furnish or cause to be furnished to Sunburst and its representatives all
data and information concerning the business, finances and properties of Vector
and its subsidiary that may reasonably be requested.
6.05 Vector shall have established to the reasonable satisfaction of
Sunburst that following completion of the transactions described herein,
Sunburst will have total assets of not less than $11,500,000 liabilities of not
more than $7,100,000, and net equity of not less than $4,400,000.
7. Conditions Precedent to Closing by Vector.
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The obligations of Vector to transfer the assets under this Agreement are
subject to the satisfaction, at or before the closing, of all the conditions set
out below in this paragraph 7. Vector may waive any or all of these conditions
in whole or in part without prior notice; provided, however, that no such waiver
of a condition shall constitute a waiver by Vector of any of its other rights or
remedies, at law or in equity, if Sunburst shall be in default of any of its
representations, warranties, or covenants under this Agreement. The conditions
are as follows:
7.01 Except as otherwise permitted by this Agreement, all representations
and warranties by Sunburst in this Agreement or in any written statement that
shall be delivered to Vector under this Agreement be true on and as of the
closing date as though made at that time.
7.02 Sunburst shall have performed, satisfied and complied with all
covenants, agreements and conditions required by this Agreement to be performed
or complied with by it on or before the closing date.
7.03 During the period from the date hereof to the closing date, there
shall not have been any material adverse change in the financial condition or
the results of operations of Sunburst, and Sunburst shall not have sustained any
material loss or damage to its assets, whether or not insured, that materially
affects its ability to conduct a material part of its business.
7.04 Vector and its counsel, accountants and other representatives shall
have full access during normal business hours to all properties, books,
accounts, records, contracts and documents of or relating to Sunburst. Sunburst
shall furnish or cause to be furnished to Vector and its representatives all
data and information concerning the business, finances and properties of
Sunburst and its subsidiary that may reasonably be requested.
7.05 Michael Quinn and Jay Lutsky shall each have executed letters of
resignation as officers and directors of Sunburst and shall have agreed to
appoint successor directors designated by Vector to serve for their remaining
unexpired terms.
8. Miscellaneous.
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8.01 Expenses. Vector shall be responsible for payment of all legal and
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accounting fees incurred by Sunburst in connection with completion of the
transaction described herein.
8.02 Binding Effect. This Agreement shall be binding upon and inure to the
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benefit of the parties hereto, their successors and assigns.
8.03 Prior Agreements; Amendments. This Agreement supersedes all prior
-------------------------------
agreements and understandings between the parties with respect to the subject
matter hereof. This Agreement may be amended only by a written instrument duly
executed by the parties hereto or their respective successors or assigns.
8.04 Headings. The section and paragraph headings contained in this
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Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretations of this Agreement.
8.05 Governing Law. This Agreement shall be governed by and construed in
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accordance with the laws of the State of Colorado.
8.06 Counterparts; Facsimile Treated as Original. This Agreement may be
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executed simultaneously in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. Facsimile signatures on counterparts shall be treated as originals.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Asset Purchase Agreement
as of the day and year first above written.
SUNBURST ACQUISITIONS II, INC. VECTOR ENERGY CORPORATION
________________________________ _________________________________
<PAGE>
EXHIBIT 2.02
ASSET TRANSFER AGREEMENT
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This ASSET TRANSFER AGREEMENT ("Agreement") dated as of March 23, 1998, is
between LISBON DEVELOPMENT COMPANY, L.L.C., a Texas limited liability company
with offices at 1330 Post Oak Blvd., Suite 2222, Houston Texas 77056 ("Seller")
and VECTOR ENERGY CORPORATION, a Texas corporation, whose address is 5599 San
Felipe, Suite 620, Houston, Texas 77056, ("Buyer").
In consideration of the mutual covenants and agreements contained herein,
the benefits to be derived by each party hereunder, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Seller and Buyer agree as follows:
ARTICLE 1. TRANSFER OF ASSETS
1.1 The Properties. Subject to the terms and conditions of this Agreement,
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Seller agrees to transfer and convey to Buyer, and Buyer agrees to acquire from
Seller, effective as of 7:00 a.m. Central Standard Time, on March 23, 1998 (the
"Effective Date"), at the location of the respective properties (the "Effective
Time") all of Seller's right, title, and interest in and to the following:
(a) The oil, gas and mineral leases and the leasehold estates created
thereby, described in Exhibit "A" attached hereto (the "Leases"), insofar as the
Leases cover and relate to the land and depths described in Exhibit "A" (the
"Land"), together with corresponding interests in and to all the property and
rights incident thereto, including, all rights in any pooled or unitized acreage
by virtue of the Land being a part thereof, all production from the pool or unit
allocated to any such Land, and all interests in any wells within the pool or
unit associated with the Land;
(b) The oil and/or gas wells described on Exhibit "A" (the "Wells")
together with all personal property, equipment, fixtures, and improvements
located on and appurtenant to the Leases insofar as they relate to the
production, treatment, sale, or disposal of hydrocarbons or water produced from
or attributable to the Wells;
(c) To the extent transferable by Seller without material restriction
under applicable law or third-party agreements (without the payment of any funds
or consideration), all contracts and contractual fights, obligations, and
interests, including all farmout and farmin agreements, operating agreements,
production sales and purchase contracts, saltwater disposal agreements, surface
leases, division and transfer orders, and other contracts or agreements covering
or affecting any or all of the interests described or referred to above (the
"Contracts");
(d) All easements, rights-of-way, licenses, authorizations, permits, and
similar rights and interests applicable to, or used or useful in connection
with, any or all of the above-described interests;
(e) All oil, condensate, natural gas liquids, and other minerals produced
after the Effective Time attributable to Seller's interest in the Properties;
(f) Subject to the terms and conditions contained herein, including,
without limitation, Section 3.1 hereof, all notes and accounts receivable of
Seller, whether recorded or unrecorded, billed or not billed, or assigned for
collection, accrued and existing up to and subsequent to the Effective Time;
(g) Cash in Seller's bank account on the date prior to the Effective Date;
and
(h) All proceeds, regardless of when received, generated from the sale of
oil and/or gas attributable to production from the Properties prior to the
Effective Date.
All of the above real, personal, tangible, and intangible properties,
rights, titles, and interests described in subparagraphs (a) through (h) above,
subject to the limitations and terms expressly set forth herein and in the
Exhibit "A" attached hereto, are hereinafter collectively called the
"Properties" or, individually, a "Property".
1.2 Excluded Assets. The following items, which are related to the
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Properties are not intended by the parties to be a part of the transfer
contemplated hereunder and are specifically excluded from the Properties:
(a) Those items specifically described on Schedule 1.2(b) hereto.
All other assets of Seller associated with or employed in the business
operations of Seller, whether or not scheduled or described herein, are not
expressly included in the Properties to the conveyed to Buyer pursuant to this
Agreement.
1.3 Assumed Liabilities. As of the Effective Date, Buyer agrees to assume
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the future payment and performance of the following liabilities and obligations
of Seller, whether known or unknown, fixed or contingent, recorded or unrecorded
(collectively, the "Assumed Liabilities"):
(a) The Contracts;
(b) All notes payable, indebtedness, royalty payments, or other
obligations, liabilities, and guarantees of Seller whether or not accrued on or
before the Effective Date as set forth in Schedule 1.3(b) attached hereto and
incorporated herein by reference;
(c) All of Seller's current liabilities as set forth in Schedule 1.3(c)
attached hereto and incorporated herein by reference;
(d) That certain credit facility of Seller in the aggregate principal
amount of up to $10,000,000.00 (the "Credit Facility") payable to First Union
Bank, N.A. (the "Bank"); and
(e) Such other liabilities of Seller as Buyer expressly elects to assume
in writing.
Buyer shall indemnify and hold each of Seller and Seller Group harmless
from all suits, actions, losses, damages, claims, or liabilities of any
character, type, or description whatsoever, including, without limitation, all
expenses of litigation, court costs, and attorney's fees, relating to or arising
out of the Assumed Liabilities and/or Buyer's assumption of the payment or
performance of any of the Assumed Liabilities, WHETHER OR NOT SUCH SUITS,
ACTIONS, LOSSES, DAMAGES, CLAIMS, OR LIABILITIES ARE THE DIRECT OR INDIRECT
RESULT OF THE NEGLIGENCE, GROSS NEGLIGENCE, OR STRICT LIABILITY OR SELLER OR
SELLER GROUP.
ARTICLE 2. DELIVERY OF PREFERRED STOCK
2.1 Delivery of Preferred Stock. Upon the basis of the representations and
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warranties and on the terms and subject to the conditions set forth in this
Agreement, in consideration of the transfer and conveyance of the Properties
from Seller to Buyer and of Buyer's assumption of the Assumed Liabilities, Buyer
hereby agrees to deliver to Seller, and Seller hereby agrees to accept 30,000
shares of Buyer's 6% senior preferred stock (the "Preferred Stock") of Sunburst
Acquisition 11, Inc., a Colorado corporation ("Sunburst"), which shares of
Preferred Stock shall be convertible into an aggregate of 3,000,000 shares of
unrestricted, freely tradable common stock of Sunburst, at the Closing
(hereinafter defined) and on the Closing Date (hereinafter defined) as provided
in Article 9 hereof.
ARTICLE 3. USE OF PROCEEDS
3.1 Proceeds from Production.
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(a) All proceeds of production received by Seller or for Seller's account
which are attributable to the production of oil and/or gas prior to the
Effective Date shall be immediately deposited by Buyer into Seller's bank
account at the Bank. All such proceeds, to-ether with all cash in Seller's
account as of the Effective Date, shall be used by Buyer solely for the payment,
satisfaction, and discharge of the Assumed Liabilities until such time as all of
the Assumed Liabilities have been paid, satisfied, and discharged in full by
Buyer.
(b) All proceeds, revenues, funds and other income generated by Buyer from
the operation of, production from, or sale of the Properties or otherwise shall
be immediately deposited by Buyer unto an escrow account established at the
Bank. All such proceeds, revenues, funds, and income shall be used by Buyer
solely for the payment and discharge of all of the Assumed Liabilities until
such time as all of the Assumed Liabilities have been paid and discharged in
full by Buyer or Buyer has made arrangements, subject to the approval and
satisfaction of Seller, for the good faith and diligent discharge or contesting
of any such Assumed Liabilities.
(c) In the event Buyer fails to fully comply with, perform, and carry out
Buyer's duties and responsibilities as set forth in this Article 3 or Seller
receives notice of any claim against Seller for the payment or satisfaction of
any of the Assumed Liabilities, then, upon delivery of notice by Seller to Buyer
of such claim and Buyer's continued failure to fully pay, satisfy, and discharge
such claim or failure to commence with the good faith and diligent contesting of
such claim for a period of thirty (30) days, Seller shall have the right, but
not the obligation, at no additional cost and expense to Seller, to re-take
immediate possession of the Properties, and Buyer agrees to fully cooperate with
Seller and take such additional acts and execute and deliver such other
instruments as Seller may request in order to re-convey and re-transfer full
right, title, and interest to, vest in, and place Seller in legal and actual
possession of the Properties.
(d) Buyer shall indemnify and hold each of Seller and Seller Group
harmless from all suits, actions, losses, damages, claims, or liabilities of any
character, type, or description whatsoever, including without limitation, all
expenses of litigation, court costs, and attorney's fees, relating to or arising
out of the Assumed Liabilities, Buyer's assumption of the payment or performance
of any of the Assumed Liabilities, and/or the performance of Buyer's duties,
obligations, and responsibilities with respect to any of the Assigned
Liabilities as provided in this Article 3 or otherwise, whether or not such
suits, actions, losses, damages, claims, or liabilities are the direct or
indirect result of the negligence, cross negligence, or strict liability or
Seller or Seller Group.
ARTICLE 4. REPRESENTATIONS OF SELLER
4.1 Existence. Seller is a limited liability company duly organized,
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validly existing, and in good standing under the laws of the state of its
organization, and is duly qualified to do business in the states in which the
Properties are located.
4.2 Authorization. Seller has all authority necessary to enter into this
--------------
Agreement and to perform all its obligations hereunder. This Agreement has been
duly executed and delivered on its behalf; and at the Closing all documents and
instruments required hereunder will have been duly executed and delivered. This
Agreement, and all such documents and instruments shall constitute legal, valid,
and binding obligations enforceable in accordance with their respective terms,
except to the extent enforceability may be affected by bankruptcy,
reorganization, insolvency, or similar laws affecting creditors' rights
generally.
4.3 Power. Subject to preferential purchase rights and restrictions on
------
assignment of the type typically found in the oil and gas industry as set forth
in Schedule 4.3 attached hereto and incorporated herein by reference, Seller's
execution, delivery, and performance of this Agreement and the transactions
contemplated hereby will not: (i) violate or conflict with any provision of its
certificate of organization, regulations, or other governing documents; (ii)
result in material breach of any term or condition of, or constitute a default
or cause the acceleration of any obligation under -any agreement or instrument
to which it is a party or by which it is bound; or (iii) violate or conflict
with any applicable judgment, decree, order, permit, law, rule or regulation.
4.4 Brokers. Seller has incurred no liability, contingent or other-wise,
--------
for broker's or finder's fees in respect of this transaction, for which Buyer
shall have any responsibility whatsoever.
4.5 Foreign Person. Seller is not a "foreign person*' within the meaning
---------------
of the Internal Revenue Code of 1986, as amended (the "Code"), Section 1445 and
7701 (i.e. Seller is not a nonresident alien, foreign corporation, foreign
partnership, foreign trust, or foreign trust, or foreign estate as those terms
are defined in the Code and any regulations promulgated thereunder).
4.6 Litigation. Except as set forth on Schedule 4.6, there are no lawsuits
-----------
directly involving the Properties with respect to which Seller has received
service of process, and to the best of Seller's knowledge, there are no lawsuits
with respect to Seller which Would have a Material Adverse Effect on the
Properties.
4.7 Taxes and Assessments. Seller has caused to be timely filed all
-----------------------
material tax returns relating to the Properties. Seller has caused to be paid or
provided for all ad valorem, property, production, severance and similar taxes
based upon or measured by the ownership of or the production of Hydrocarbons
from the Properties required to be shown on such returns, except those being
contested in good faith. Seller has not received written notice of any pending,
claim against Seller from any applicable taxing authority for assessments of
taxes with respect to the Properties.
4.8 Outstanding Capital Commitments. As of the Effective Time, there were
--------------------------------
no outstanding AFEs or other commitments to make capital expenditures which are
binding on the Properties and which Seller reasonably anticipates will
individually require expenditures by the owner of the Properties after the
Effective Time in excess of $50,000 other than those shown on Schedule 4.8
-------------
hereto.
4.9 Contracts. Except as disclosed on the Schedule 4.9, Seller has paid
----------
its shares of all costs payable by it under the Leases and Contracts, except
those being contested in good faith. Neither Seller, nor to the knowledge of
Seller, any other part is in default under any Contract except as disclosed on
Schedule 4.9 and except such defaults as would not, individually or the
- -------------
aggregate, have a Material Adverse Effect. Except as disclosed in Schedule 4.9,
------------
there are no Contacts with affiliates of Seller which will be binding on the
Properties after Closing.
4.10 Gas Imbalances. Except with respect to the Properties set forth on
----------------
Schedule 4.10, as of the Effective Time, Seller has no gas imbalances with
co-owners of the Properties.
4.11 Compliance with Laws. The execution and performance of this Agreement
----------------------
by Buyer does not violate any law or regulation of any jurisdiction or
governmental body or agency and does not require approval of, or filing with,
any governmental body or agency.
4.12 Representations. Statements and Certificates. No representation by
----------------
Seller, nor any statement or certificate furnished or to be furnished by Seller
pursuant to this Agreement, or in connection with the transactions contemplated
herein, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained therein not misleading. ARTICLE 5. REPRESENTATIONS OF BUYER
5.1 Existence. Buyer is a corporation duly organized, validly existing,,
----------
and in good standing under the laws of the state of its incorporation, and is
duly qualified to do business in the states in which the properties are located.
5.2 Authorization. Buyer has all authority necessary to enter into this
--------------
Agreement and to perform all its obligations hereunder. This Agreement has been
duly executed and delivered on its behalf, and at the Closing all documents and
instruments required hereunder will have been duly executed and delivered. This
Agreement, and all such documents and instruments shall constitute legal, valid,
and binding obligations enforceable in accordance with their respective terms
except to the extent enforceability may be affected by bankruptcy,
reorganizations, insolvency, or similar laws affecting creditors' rights
generally.
5.3 Power. Buyer's execution, delivery, and performance of this Agreement
------
and the transactions contemplated hereby will not: (i) violate or conflict with
any provision of its certificate of incorporation, by-laws, or other governing
documents; (ii) result in the breach of any term or condition of, or constitute
a default or cause the acceleration of any obligation under any agreement or
instrument to which it is a party or by which it is bound; or (iii) violate or
conflict with any applicable judgment, decree, order, permit, law, rule, or
regulation.
5.4 Brokers. Buyer has incurred no liability, contingent or otherwise, for
--------
broker's or finder's fees in respect of this transaction, for which Seller shall
have any responsibility whatsoever.
5.5 Further Distribution. Buyer (i) has such knowledge and experience in
----------------------
business, financial, and oil and gas matters that it is capable of evaluating
the merits and risks of entering into and of carrying out its obligations in
connection with the acquisition of the Properties in the manner contemplated
herein; (ii) has received to date all information concerning the Properties and
such other information relating to this Agreement which it requested; and (iii)
is able to bear the economic risk of its investment in the Properties for an
indefinite period of time. Further, Buyer acknowledges that Seller is relying
upon the representations contained in the foregoing sentence and that absent
such representations the proposed sale to Buyer would not be entered into and
this Agreement would not be executed and delivered by Seller.
5.6 Effective Agreement. The execution, delivery, and performance of this
--------------------
Agreement by Buyer and the consummation of the transactions contemplated hereby
do not require the consent, -waiver, approval, or authorization of any person or
public authority; do not result in a violation of any material breach of any
law, rule, or regulation applicable to Buyer, and do not conflict with or result
in a breach of any of the governing instruments of Buyer or, with or without the
giving of notice and/or the passage of time, any mortgage, deed of trust,
license, indenture, or other instrument or agreement, or any order, judgment, or
other restriction of any kind or character to which Buyer is a party.
5.7 Litigation. Except as set forth in Section 5.6, attached hereto and
----------- -----------
incorporated herein by this reference, Buyer is not a party to or threatened by
any litigation, proceeding, or controversy before any court, governmental body,
or administrative agency which would have a Material Adverse Effect on the
transactions contemplated under this Agreement.
5.8 Compliance with Laws. The execution and performance of this Agreement
----------------------
by Buyer does not violate any law or regulation of any jurisdiction or
governmental body or agency and does not require approval of, or filing with,
any governmental body or agency.
5.9 Preferred Stock. At Closing Buyer will own all of the shares of
-----------------
Preferred Stock free and clear of any claims, liens, charges, or encumbrances
whatsoever, and has good and marketable title to its shares of Preferred Stock
and has full right, power, and authority to sell the shares of Preferred Stock
to Seller as provided herein without obtaining the consent or approval of any
other person or governmental authority.
5.10 Representations, Statements and Certificates. No representation by
-----------------------------------------------
Buyer, nor any statement or certificate furnished or to be furnished by Buyer
pursuant to this Agreement, or in connection with the transactions contemplated
herein, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained therein not misleading.
5.11 Representation and Warranties as to Sunburst. Buyer hereby represents
---------------------------------------------
and warrants as to the following:
(a) Sunburst is duly organized, validly existing, and in good standing
under the laws of its incorporation and is duly qualified and in good standing
to transact business in each jurisdiction in which the nature of its business
requires such qualification;
(b) All outstanding shares of capital stock, including, without
limitation, the Preferred Stock, of Sunburst have been duly authorized and
validly issued and are fully paid, non-assessable, and are not subject to any
preemptive or similar rights; and
(c) Sunburst is a reporting company under the Securities Exchange Act of
1934, as amended (the "1934 Act"), and has duly and timely made all required
filings with the Securities and Exchange Commission as required pursuant to the
1934 Act.
ARTICLE 6. DISCLAIMER OF WARRANTIES
6.1 Information Provided. All the information, statistics, summaries, and
---------------------
facsimiles furnished by or on behalf of Seller herewith or hereunder are
furnished or will be furnished for Buyer's use at Buyer's sole risk. All such
information has been compiled or prepared by Seller based upon its files and
records and such information is believed to be correct, but Seller makes no
representation or warranty, express or implied, as to the accuracy, correctness,
completeness, or the adequacy of same and does not warrant or guarantee such
information in any way. Seller has made no statements or representations
concerning the environmental condition of the properties, production rates,
recompletion opportunities, decline rates, geological or geophysical data or
interpretations, the quality, quantity, recoverability or cost of recovery of
any hydrocarbon reserves, any product pricing assumptions, the ability to sell
or market any hydrocarbons after Closing, or the present or future value of the
anticipated income, costs, or profits, if any, to be derived from the
properties. Buyer is responsible for making such independent investigation and
evaluation of the properties as Buyer shall deem appropriate, realizing that
Seller does not assume and shall have no liability to Buyer or any other party
whatsoever for any reliance which may be placed on the information, statistics,
summaries, or facsimiles furnished herewith or hereunder or any statements made
herein. Specifically, but without limiting the generality of the foregoing:
(i) The description of leases included in the properties, the acreage
purported to be covered thereby, depth limitations (if any), royalty and other
burdens affecting same, and quantum of interest have been derived strictly from
Seller's records and seller has not undertaken any examination of title to
verify same. Seller does not warrant title to the Properties, except as against
parties claiming, by, through, or under Seller, and Buyer should therefore
undertake such independent title examination as it deems appropriate prior to
closing; and
(ii) The description of wells and equipment included in the properties has
been compiled strictly from Seller's records rather than from an on-the-ground
inventory. Prior to Closing, Buyer should undertake such independent inspection
or inventory as it deems appropriate to determine whether the equipment so
described is in fact in place.
6.3 No Warranties. Conveyance of the properties will be made without
---------------
representations or warranties, express or implied in fact or in law, as to
merchantability, durability, use, operation, fitness for any particular purpose,
condition, safety of the properties, compliance with regulatory and
environmental requirements or otherwise.
6.4 Buyer Inspection. Buyer hereby agrees that it will inspect the
------------------
properties, including, without limitation, the leases and the contracts, wells
personal property, and equipment assigned and conveyed herein and that it will
accept the same "AS IS, WHERE IS" and "WITH ALL FAULTS". Buyer releases Seller
Group (as defined herein) from all Losses (as defined herein) with respect to
- -the properties, whether or not caused by or attributable to Seller's negligence
and whether or not arising from or in connection with or during the period of
Seller's ownership or use of the properties. Without limiting the above, Buyer
waives its right to recover from Seller Group and forever releases and
discharges Seller Group from any and all losses, penalties, fines, liens,
judgments, costs and expenses whatsoever (including, without limitation,
attorney's fees and costs), whether direct or indirect, known or unknown,
foreseen or unforeseen, that may arise on account of or in any way be connected
with the physical condition of the properties or any law or regulation
applicable thereto, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as Amended (42
U.S.C. 9601 Et. Seq.), the Clean Water Act (33 U.S.C. 466 Et. Seq.), the Safe
-- --- -- ---
Drinking Water Act (14 U.S.C. 1401-1450), the Hazardous Materials Transportation
Act (49 U.S.C. 1801 Et. Seq.), the Toxic Substance Control Act (15 U.S.C. 2601
-- ---
- -2629) and all applicable state or local laws.
6.5 Prior Operations. Buyer hereby acknowledges that the Properties have
-----------------
been utilized for the purpose of production and development of oil and gas and
that there may have been spills of wastes, crude oil, produced water or other
materials in the past onto the Properties or in connection therewith. In
addition, some oil field production equipment may contain asbestos or naturally
occurring radioactive material (hereinafter referred to as "NORM"). In this
regard Buyer expressly understands the NORM may affix or attach itself to the
inside of wells, materials and equipment as scale, or in other forms, and that
said wells, materials and equipment located on the Properties or included
therein may contain NORM and that NORM-containing, material may be buried or
otherwise disposed of on the Properties. Buyer also expressly understands that
special procedures may be required for the remediation, removal, transportation
and disposal of asbestos and NORM from the Properties where it may be found, and
Buyer assumes all responsibility and liability for or in connection with
assessment, remediation, removal, transportation, and disposal of any such
materials and associated activities in accordance with all rules, regulations
and requirements of governmental agencies.
ARTICLE 7. SELLER'S CONDITIONS OF CLOSING
The obligation of Seller to close this transaction shall be subject to and
conditioned upon the following any one or more of which may be waived by Seller,
in whole or in part:
7.1 Representations. The representations of Buyer under Article 5 of this
----------------
Agreement shall be true and accurate in all material respects as of the date
when made and shall be deemed to be made again at and as of the time of the
Closing and shall then be true and accurate in all material respect.
7.2 Performance. Buyer shall have performed and complied with each
------------
covenant, agreement, and condition required by this Agreement to be performed or
complied with by it prior to or at Closing.
7.3 Pending Matters. At Closing, no litigation, proceeding, investigation,
----------------
or inquiry shall be pending or threatened to enjoin or prevent the consummation
of the transactions contemplated by this Agreement.
7.4 Bonds. Where applicable, Buyer shall have furnished evidence
------
satisfactory to Seller that Buyer has obtained any requisite plugging bonds and
other assurances required by governmental authorities having jurisdiction,
including where applicable, qualification to assume operatorship.
7.5 Certificate of Designation. Buyer shall have filed with the Secretary
---------------------------
of State of the State of Colorado a Certificate of Designation in substantially
the form as set forth on Schedule 7.5, attached hereto and incorporated herein
------------
by reference, setting forth the rights, preferences, and other characteristics
of the Preferred Stock.
7.6 Consent from the Bank. Buyer shall have obtained from the Bank the
-----------------------
necessary written authorization and consent of the terms and provisions of this
Agreement and the transactions contemplated hereby, including, without
limitation, the assumption by Buyer of the Credit Facility.
7.7 Public Shell Acquisition. Buyer shall have entered into a definitive,
-------------------------
written agreement with Sunburst to acquire approximately 600,000 shares of
common stock of Sunburst, constituting, approximately ninety percent (90%) of
all of the issued and outstanding shares of voting capital stock of Sunburst.
ARTICLE 8. BUYER'S CONDITIONS OF CLOSING
The obligation of Buyer to close this transaction shall be subject to and
conditioned upon the following, any one or more of which may be waived by Buyer,
in whole or in part:
8.1 Representations. The representations of Seller under Article 4 of this
----------------
Agreement shall be true and accurate in all material respects as of the date
when made and shall be deemed to be made again at and as of Closing and shall
then be true and accurate in all material respects.
8.2 Performance. Seller shall have performed and complied with each
------------
material covenant, agreement, and condition required by this Agreement to be
performed or complied with by Seller prior to or at the Closing.
8.3 Pending Matters. At Closing, no suit or action shall have been
-----------------
instituted or threatened that questions or reasonably appears to adversely
materially affect the validity or legality of this Agreement or the transactions
contemplated by this Agreement.
8.4 Consent from the Bank. Seller shall have obtained from the Bank the
----------------------
necessary written authorization and consent of the terms and provisions of this
Agreement and the transactions contemplated hereby, including, without
limitation, the assumption by Buyer of the Credit Facility.
ARTICLE 9. CLOSING
9.1 Time and Place of Closing. Subject to the conditions stated in this
--------------------------
Agreement, the consummation of the transactions contemplated hereby (the
"Closing") shall occur on April 10, 1998 (the "Closing Date"); provided,
however, that if all of the conditions to Closing set forth in Articles 10 and
11 have not been satisfied or waived by such date or any extended date for
Closing the party whose obligations are subject to the conditions that have not
been satisfied or waived shall have the right to extend the date of Closing for
successive periods of up to seven days each until such conditions shall have
been satisfied or waived. The Closing shall be held at Seller's offices located
at 1330 Post Oak Boulevard, Suite 2222, Houston, Texas 77056, or at such other
location as may be mutually agreed upon by Seller and Buyer.
9.2 Closing Obligations.
--------------------
(a) At Closing, Seller shall deliver to Buyer the following:
(i) Executed Assignment, Bill of Sale and Conveyance of the
Properties, in the form attached hereto as Exhibit "B";
(ii) Resignations of Seller's operator of any of the Properties of
which Seller is operated;
(iii)Possession of the Properties; and
(iv) assignments of the Leases, duly executed by Seller;
(v) letters-in-lieu of transfer orders concerning the Properties,
duly executed by Seller;
(vi) an executed statement described in Treasury Regulation Section
1.1445-2(b)(2) certifying that Seller is not a "foreign person"
within the meaning of the Internal Revenue Code of 1986, as
amended; and
(vii)a certificate duly executed by a manager of Seller, dated as of
the Closing, (1) attaching, and certifying on behalf of Seller
complete and correct copies of (A) resolutions of the managers of
Seller authorizing execution, delivery, performance by the Seller
of this Agreement and the transactions contemplated hereby and
(B) any acquired approval by the members of Seller of this
Agreement and the transactions contemplated hereby; and (2)
certifying on behalf of Seller the incumbency of each officer of
Seller executing this Agreement or any document delivered in
connection with the Closing.
(b) At Closing, Buyer shall:
(i) Deliver to Seller the bearer of stock certificated representing
30,000 shares of Preferred Stock;
(ii) Execute the Assignment, Bill of Sale and Conveyance delivered by
Seller to Buyer at Closing, evidencing, Buyer's acceptance of
same and assumption of all obligations thereunder;
(iii)Evidence that Buyer has obtained any requisite plugging bonds
and other assurances required by governmental authorities having
jurisdiction, including, where applicable, qualification to
assume operatorship;
(iv) Well transfer permits, the originals of which shall be retained
by Seller for filing;
(v) letters-in-lieu of transfer orders covering the Properties, duly
executed by Buyer; and
(vi) a certificate duly executed by the secretary of Buyer, dated as
of the Closing, (1) attaching, and certifying on behalf of Buyer
as complete and correct, copies of (A) the certificate of
incorporation and bylaws of Buyer, each as in effective as of the
Closing, (B) the resolutions of the Board of Directors of Buyer
authorizing execution, delivery, and performance by Buyer of this
Agreement and the transactions contemplated hereby, and (C) any
required approval by the stockholders of Buyer of this Agreement
and the transactions contemplated hereby; and (2) certifying on
behalf of Buyer the incumbency of each officer of Buyer executing
this Agreement or any document delivered in connection with the
Closing.
9.3 Further Assurances. The parties shall execute, acknowledge, and
--------------------
deliver any other documents and shall take such other actions as may be
reasonably necessary to carry out their obligations under this Agreement.
9.4 Simultaneous Closing. The delivery of all documents and actions taken
----------------------
at the Closing shall all be considered parts of a simultaneous transaction and
no delivery of documents or action taken shall be considered completed until all
documents for such Closing have been delivered and other action taken.
ARTICLE 10. ADDITIONAL AGREEMENTS
10.1 Notices. All notices hereunder shall be in writing and any
--------
communication or delivery hereunder shall be deemed to have been duly made when
personally delivered to the individual indicated below, or if mailed, when
received by the party charged with such notice and addressed as follows:
SELLER Lisbon Development Company, L.L.C.
------
1330 Post Oak Blvd, Suite 2222
Houston Texas 77056
With a copy to:
James W. Chang, Esq.
Johnson & Bumett, L.L.P.
1330 Post Oak Blvd, Suite 2222
Houston Texas 77056
BUYER: Vector Energy Corporation
-----
5599 San Felipe, Suite 620
Houston, Texas 77056
Attn: Mr. Steve Nosier, President
Any party may, by written notice so delivered to the other, change the address
of the individual to which or to whom delivery shall thereafter be made.
10.2 Recording, Documents. Buyer shall pay all transfer, documentary,
----------------------
filing, and recording fees incurred in connection with the filing and recording
of the instruments of conveyance. As soon as practicable after Closing, Buyer
shall provide Seller with copies of all recorded documents conveying the
Properties to Buyer.
10.3 Right of Termination.
---------------------
(a) This Agreement and the transactions contemplated hereby may be
terminated in the following instances:
(i) By Seller if any of the conditions set forth in Article 7 are not
satisfied in all material respects or waived as of the Closing
Date;
(ii) By Buyer if any of the conditions set forth in Article 8 are not
satisfied in all material respects or waived as of the Closing
Date; or
(iii) At any time by the mutual written agreement of Buyer and Seller.
(b) In the event of the termination of this Agreement by Seller in
accordance with Section 10.3(a)(i), Seller shall have no liability hereunder of
any nature whatsoever to Buyer, including any -liability for damages. If Buyer
terminates this Agreement in accordance with Section 10(' ))(a)(i) above, it
shall have no liability hereunder of any nature whatsoever to Seller including
any liability for damages. If Buyer terminates this Agreement other than in
accordance with Section 10(3)(a)(ii), or if Seller terminates this Agreement in
accordance with Section 10(3)(a)(ii), Seller shall retain the Deposit with all
interest earned thereon and Buyer shall have no further liability hereunder of
any nature whatsoever to Seller including any liability for damages.
(c) Except as provided above in this Section 10.3(b), nothing contained
herein shall be construed to limit Seller's or Buyer's legal or equitable
remedies in the event of breach of this Agreement.
10.4 Operation of Business. Until the Closing, Buyer will (i) operate the
----------------------
Properties in the ordinary course, (ii) will not, without the prior written
consent of Seller, which consent shall not be unseasonably withheld, commit to
any operation reasonably anticipated by Buyer to require future capital
expenditures by the owner of the Properties in excess of $10,000 or make any
capital expenditures in excess of $10,000 except for matters set forth on
Schedule 4.8, or terminate, materially amend, execute or extent any material
agreements affecting the Proper-ties, (iii) will maintain general insurance
coverage on the Properties furnished by nonaffiliated third parties in the
amounts and of the types presently in force, (iv) will use commercially
reasonable efforts to maintain in full force and effect all Leases, (v) will
maintain all material governmental permits and approvals affecting the
Properties, and (vi) will not transfer, sell, hypothecate, encumber or otherwise
dispose of any material Properties except for sales and dispositions of oil and
gas production and Equipment made in the ordinary course of business consistent
with past practices. Seller's approval of any action restricted by this Section
10.4 shall be considered granted within 10 days (unless a shorter time is
reasonably required by the circumstances and such shorter time is specified in
Buyer's notice) of Buyer's notice to Seller requesting such consent unless
Seller notifies Buyer to the contrary during that period. In the event of an
emergency, Buyer may take action as a prudent operator would take and shall
notify Seller of such action promptly thereafter.
10.5 Indemnify Regarding Access. Buyer agrees to indemnify, defend and hold
---------------------------
harmless Seller and the Seller Group from and against any and all claims,
liabilities, losses, costs and expenses attributable to personal injuries,
death, or property damage, arising out of or relating to access to the
Properties and to the records and other related information prior to the Closing
by Buyer and the Seller Group, EVEN IF CAUSED IN HOLE OR IN PART BY THE
NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL
FAULT OR ANY OF SELLER OR THE SELLER GROUP.
ARTICLE 11. ASSUMPTION OF OBLIGATIONS; INDEMNIFICATION
11.1 Definitions. As used in this Agreement:
------------
(a) "Losses" means any liabilities, losses, claims, demands, causes of
action, costs and expenses (including, but not limited to, court costs and
reasonable attorneys' fees and other costs and -expenses incident to proceedings
or investigations respecting, or the prosecution or defense of, a claim) of
every kind and character.
(b) "Material Adverse Effect" means any material adverse change in the
condition (financial or otherwise), business, operations, properties, prospects,
assets or liabilities, of Seller in the aggregate (whether or not covered by
insurance).
(c) "Seller Group" means Seller and its managers, members, officers,
directors, contractors, agents, employees, attorneys, accountants, professional
advisors, and representatives.
11.2 Assumption of Contracts. The sale of the Properties is and will be
--------------------------
made subject to the Contracts to, which the Properties are presently subject.
Buyer shall assume and be responsible for all obligations accruing under the
Contracts as of and after the Effective Time.
11.3 Imbalances. Buyer shall accept all gas and oil imbalances as set forth
-----------
on Schedule 11.3 attached hereto and incorporated herein by reference and shall
assume all responsibility to settle with other interest owners for any such
disclosed over or under gas or oil imbalances that exist on the Properties. If
the gas or oil imbalance on a particular Property is a net liability, Buyer
shall defend, indemnify, and hold Seller harmless for that net liability. For
purposes hereof, an "imbalance" shall include any circumstance regarding
production taken or marketed from the Properties which could result in (i) a
portion of Buyer's interest in such production being sold without Buyer
receiving payment therefor; or (ii) Buyer being obligated to make payment to any
person or entity as a result of such imbalance; or (iii) any other circumstance
by which Buyer would be obligated by virtue of any prepayment arrangement,
take-or-pay agreement, or similar arrangement binding on the Properties after
Closing, to deliver hydrocarbons produced from the Properties at some future
time without then receiving full payment therefor.
11.5 Buyer's General Indemnity. Buyer hereby agrees to assume all
-----------------------------
responsibility for the wells, the casing, and all other leasehold equipment in
and on said wells, and all other personal property and fixtures used on or in
connection with the Leases before, on, and after the Effective Time. Buyer
agrees to defend, indemnify, and hold Seller Group harmless from and against any
and all Losses arising out of, incident to, or in connection with the
Properties, operations on the Properties, arising and occurring before, on, or
after the Effective Time.
11.6 Operations Prior to Closing. Seller hereby releases Buyer, and agrees
----------------------------
to indemnify, defend and hold Buyer harmless, from all Losses with respect to
continued operations by Buyer under Section 10.4, WHETHER OR NOT CAUSED IN WHOLE
OR IN PART BY, AND INCLUDING, AND SOLE OR CONCURRENT NEGLIGENCE OR STRICT
LIABILITY OF BUYER, UNLESS CAUSED BY BUYER'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
11.7 Buyer's Environmental Indemnification. Except as to the
--------------------------------------------
indemnification, if any, provided under Section 11.5, Buyer, its successors and
assigns, hereby agree to indemnify against, and defend and hold Seller Group
harmless from all Losses (including but not limited to any civil fines,
penalties, expenses, costs of clean-up or remediation, and plugging liabilities
for any and all wells) brought by any and all persons, including, but not
limited to, Buyer's and Seller's employees, agents, or representatives and also
any private citizens, persons, or organizations and any agency, branch, or
representative of federal, state, or local government, on account of any
personal injury, disease, or death or any damage, destruction, loss of property
or contamination of natural resources (including air, soil, surface water, or
ground water) resulting from, arising out of any liability caused by, or
connected with any environmental condition of, on, or resulting from the
Properties before, on, or after the Effective Time, including, but not limited
to, the presence, disposal, or release of any material of any kind in, on or
under the Properties or other affected property, or at any time caused by or
connected with acts or omissions of any party's employees, representatives, or
agents with regard to the use, ownership, or operatorship of the Properties.
BUYER'S INDEMNIFICATION SHALL EXTEND TO AND INCLUDE (i) THE NEGLIGENCE OF SELLER
GROUP, BUYER, AND PARTIES ACTING ON BEHALF OF BUYER, WHETHER SUCH NEGLIGENCE IS
ACTIVE OR PASSIVE, JOINT, SOLE, OR CONCURRENT, AND (ii) BUYER'S STRICT
LIABILITY. This indemnification shall be in addition to any other indemnity
provisions contained in this Agreement, and it is expressly understood and
agreed that any terms of this Section 11.7 shall control over any conflicting or
contradicting terms or provisions contained in this Agreement, except control
over any conflicting or contradicting terms or provisions contained in this
Agreement, except as to the indemnity, if any, provided under Section 11.5.
11.8 Buyer's Plugging Liability. Buyer shall properly plug and abandon at
----------------------------
Buyer's sole cost and expense all wells herein assigned or located on the
Properties and shall clean and restore the surface at Buyer's expense and in
accordance with the applicable Lease provisions and state and federal rules and
regulations pertaining to the plugging and abandoning of such wells and the
restoration of such surface. Buyer shall indemnify, defend, and hold Seller
Group harmless from and against all Losses as a result of Buyer's failure to
comply with the provisions of this Section 11.8.
ARTICLE 12. ARBITRATION
12.1 Selection of Arbitrators. Any controversy between the parties hereto
-------------------------
arising under this Agreement and not resolved by agreement shall be determined
by a board of arbitration upon notice of submission given by either party to the
other, which notice shall name a qualified, independent arbitrator. Within ten
(10) days after the receipt of such notice, the other party shall name a
qualified, independent arbitrator, of failing to do so the party giving notice
shall name the second. The two arbitrators so appointed shall name the third
qualified, independent arbitrator, or failing, to do so, the third arbitrator
may be appointed by the Senior Judge (in service) of the United States District
Court for the Southern District of Texas.
12.2 Determination. The arbitrators selected to act hereunder shall be
-------------
qualified by education and experience to pass on the particular question in
dispute. The arbitrators shall promptly -hear and determine (after due notice
of hearing and giving the parties a reasonable opportunity to be heard) the
questions submitted, and shall render their decision within sixty days after
appointment of the third arbitrator. If within said period a decision is not
rendered by the board, or majority thereof, new arbitrators may be named and
shall act hereunder at the election of either Buyer or Seller in like manner as
if none had been previously named.
12.3 Decision Binding. The decision of the arbitrators, or the majority
------------------
thereof, made in writing shall be final and binding, upon the parties hereto as
to the questions submitted, and Buyer and Seller will abide by and comply with
such decision. The expenses of arbitration, including reasonable compensation to
the arbitrators, shall be borne equally by the parties hereto, except that each
party shall bear the compensation and expenses of its own counsel, witnesses,
and employees.
ARTICLE 13. MISCELLANEOUS
13.1 Amendment. This Agreement may not be amended nor any rights hereunder
----------
waived except by an instrument in writing signed by the party to be charged with
such amendment or waiver and delivered by such party to the party claiming the
benefit of such amendment or waiver.
13.2 Gender. References made in this Agreement, including use of a pronoun,
-------
shall be deemed to include where applicable, masculine, feminine, singular or
plural, individuals, partnerships, or corporations. As used in this Agreement,
"person" shall mean any natural person, corporation, limited liability company,
partnership, trust, estate, or other entity.
13.3 Entire Agreement. This Agreement constitutes the entire understanding
-----------------
among the parties with respect to the subject matter hereof, superseding all
negotiations, prior discussions, and prior agreements and understandings
relating to such subject matter.
13.4 Successors and Assigns. This Agreement shall be binding upon and shall
-----------------------
inure to the benefit of, the parties hereto and, except as otherwise prohibited,
their respective successors and assigns; and except as otherwise stated herein,
nothing contained in this Agreement, or implied herefrom, is intended to confer
upon any other person or entity any benefits, rights, or remedies. This
Agreement and any rights, obligations, responsibilities, and duties of Buyer
hereunder may be assigned by Buyer with the prior written consent of Seller,
which consent shall not be unreasonably withheld, conditioned, or delayed.
13.5 Survivability. Except as otherwise specifically provided in this
--------------
Agreement, all indemnifications, covenants, agreements, representations,
guaranties, and warranties shall survive the execution of the Agreement, the
Closing, and the delivery and recordation of any deeds, assignments, or bills of
sale which convey the Properties from Seller to Buyer.
13.6 Severability. If a court of competent jurisdiction determines that any
-------------
clause or provision of this Agreement is void, illegal, or unenforceable, the
other clauses and provisions of the -Agreement shall remain in full force and
effect and the clauses and provisions which are determined to be void, illegal,
or unenforceable shall be limited so that they shall remain in effect to the
extent permissible by law.
13.7 Governing Law. This Agreement shall be governed by and construed under
--------------
the laws of the State of Texas (excluding any conflict of laws provision that
would require the application of the law of any other jurisdiction).
13.8 Section Headings. The section headings contained in this Agreement are
-----------------
for convenience only and shall not in any way affect the meaning or
interpretation of this Agreement.
13.9 Waiver. No waiver of any provision of or rights under this Agreement
-------
shall be effective unless in a writing, signed by the waiving party. No waiver
of any specified right or provision shall be construed as a waiver of any other
right or provision.
The parties have executed this Agreement as of the date first above mentioned.
SELLER:
Lisbon Development Company, L.L.C.
By:
-------------------------------------
Nick H. Johnson, Manager
BUYER:
Vector Energy Corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
EXHIBIT "A"
Attached to and made a part of that certain Purchase and Sale Agreement
between Lisbon Development Company, L.L.C. and Vector Energy Corporation
dated March 23, 1998
DESCRIPTION OF LEASES BEING CONVEYED
------------------------------------
DESCRIPTION OF WELLS AND INTERESTS BEING CONVEYED
-------------------------------------------------
<PAGE>
EXHIBIT "B"
------------
Attached to and made a part of that certain Purchase and Sale Agreement
between Lisbon Development Company, L.L.C. and Vector Energy Corporation
dated March 23, 1998
ASSIGNMENT, BILL OF SALE AND CONVEYANCE
--------------------------------------------
THE STATE OF []
-----------------
[]
COUNTY OF []
----------------
Lisbon Development Company, L.L.C., a Texas limited liability company,
whose address is 1330 Post Oak Blvd., Suite 2222, Houston, Texas 77056
(hereinafter called "Assignor"), for and in consideration of the sum of Ten and
No/100 Dollars ($10.00) and other good and valuable consideration the receipt,
adequacy and sufficiency of which are hereby acknowledged, does hereby sell,
transfer, assign and convey unto ____________________________ a
______________________________________, whose address is ____________________
(hereinafter called "Assignee"), all of Assignor's right, title and interest in
and to the following:
(a) The oil, gas and mineral leases and the leasehold estates created
thereby, described in Exhibit "A" attached hereto (the "Leases"), insofar as the
Leases cover and relate to the land and depths described in Exhibit "A" (the
"Land"), together with corresponding interests in and to all the property and
rights incident thereto, including all rights in any pooled or unitized acreage
by virtue of the Land being a part thereof, all production from the pool or unit
allocated to any such Land, and all interests in any wells within the pool or
unit associated with the Land;
(b) The oil and/or gas wells described on Exhibit "A" attached hereto (the
"Wells") together with all personal property, equipment, fixtures, and
improvements located on and appurtenant to the Leases and Lands insofar as they
are used or obtained in connection with the operation of the Wells and insofar
as they cover the Lands or relate to the production, treatment, sale, or
disposal of hydrocarbons or water produced from or attributable to the Wells;
(c) To the extent transferable by Assignor without material restriction
under applicable law or third-party agreements (without the payment of any funds
or consideration), all contracts and contractual rights, obligations, and
interests, including all farmout and farmin agreements, operating agreements,
production sales and purchase contracts, saltwater disposal agreements, surface
leases, division and transfer orders, and other contracts or agreements covering
or affecting any or all of the interests described or referred to above;
(d) All easements, rights-of-way, licenses, authorizations, pen-nits, and
similar rights and interests applicable to, or used or useful in connection
with, any or all of the above-described interests; and
(e) All oil, condensate, natural gas, natural gas liquids, and other
minerals produced after the Effective Time attributable to Assignor's interest
in the Properties (as defined herein).
All of the above real and personal properties, rights, titles, and
interests described in subparagraphs (a) through (e) above, subject to the
limitations and terms expressly set forth herein and in the Exhibit "A" attached
hereto, but excluding the Excluded Property, are hereinafter collectively called
the "Properties" or, individually, a "Property".
This Assignment shall be effective as of __________________ at 7:00 a.m.
local time where each Property is located ("Effective Time").
THIS ASSIGNMENT IS MADE WITHOUT WARRANTIES, EXPRESSED 0 IMPLIED IN FACT OR
IN LAW, AS TO MERCHANTABILITY, DURABILITY, USE, OPERATION, FITNESS FOR ANY
PARTICULAR PURPOSE, CONDITION, SAFETY OF THE PROPERTY, COMPLIANCE WITH
REGULATORY AND ENVIRONMENTAL REQUIREMENTS OR OTHERWISE. ASSIGNOR DOES NOT IN ANY
WAY REPRESENT OR WARRANT THE ACCURACY OR COMPLETENESS OF ANY INFORMATION, DATA
OR OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED TO ASSIGNEE BY OR ON BEHALF OF
ASSIGNOR.
ASSIGNEE HEREBY AGREES THAT IT HAS INSPECTED OR HAS BEEN GIVEN THE
OPPORTUNITY TO INSPECT THE PROPERTY, INCLUDING THE LEASES AND ASSOCIATED
AGREEMENTS, WELLS, PERSONAL PROPERTY, AND EQUIPMENT ASSIGNED AND CONVEYED HEREIN
AND THAT IT ACCEPTS THE SAME "AS IS, WHERE IS" AND "WITH ALL FAULTS". Assignee
agrees to assume all responsibility for the wells, the casing and all other
leasehold equipment in and on said wells, and all other personal property and
fixtures used on or in connection therewith before, on and after the Effective
Time.
Assignee shall properly plug, and abandon as Assignee's expense all wells
herein assigned or located on the Property and shall clean and restore the
surface at Assignee's expense and in accordance with the applicable lease
provisions and State and Federal rules and regulations pertaining to the
plugging and abandoning of such wells and the restoration of such surface.
Assignee shall indemnify, defend and hold Assignor Group harmless from and
against all Losses as a result of Assignee's failure to comply with the
provisions of this paragraph and this Assignment.
All taxes, including but not limited to ad valorem, property, severance and
windfall profit taxes, shall be prorated between Assignor and Assignee as of the
Effective Time, with Assignor responsible for all such taxes accruing prior
thereto and Assignee responsible for all such taxes accruing thereafter.
Assignee shall bear and pay any real property transfer taxes and any recording
fees associated with the transfer of the Property. Assignee agrees to be solely
responsible for any and all sales taxes, if any, due on equipment, material and
property hereby assigned and sold, and Assignee shall remit such sales taxes to
the proper taxing authority.
Assignee agrees to perform all operations in compliance with all applicable
Local, State, Indian and Federal laws, orders, rules and regulations, and to
observe, perform and abide by all of the lease terms and provisions, express and
implied, applicable to Assignor's interest in the Property. Assignee further
acres to secure the bonds, permits and other documents as required by the
appropriate regulatory authority which are necessary to effectuate the transfer
of interests hereby and to cause the release of Assignor's continued liability
as lessee or operator.
Assignee accepts this transfer of the Properties subject to any and all
covenants in instruments in the chain of title and to any outstanding
agreements, whether recorded or not, which may include, but is not limited to,
agreements for options, leases, permits, rights-of-way, easements, water
disposal systems, licenses, operating agreements and production sales
agreements; and in this regard, Assignee assumes all duties and obligations
associated with said outstanding agreements, including, but not limited to, all
of Assignor's rights and obligations associated with said outstandin-g
agreements, including, but not limited to, all of Assignor's rights and
obligations in and for any gas sales, production or transportation imbalances,
whether as a result of overproduction or underproduction by Assignor.
This Assignment, Bill of Sale and Conveyance shall be binding upon and
inure to the benefit of the heirs, successors, personal representatives and
assigns of the respective parties hereto.
This Assignment, Bill of Sale and Conveyance is subject to the terms and
conditions, including, but not limited to, the assumptions and indemnifications,
contained in that certain Purchase and Sale Agreement dated
Assignor warrants title to the Properties, as against all parties
claiming by, through, or under Seller, but not otherwise.
EXECUTED this ___ day of ___________, 19__, but effective as of the Effective
Time.
ASSIGNOR:
Lisbon Development Company, L.L.C.
By:
-----------------------------------------
ASSIGNEE:
---------------------------------------------
By:
----------------------------------------
----------------------------------------
----------------------------------------
THE STATE OF TEXAS []
[]
COUNTY OF _____________ []
This instrument was acknowledged before me on the _____ day of
________________, 1998, by _______________________, as President of Lisbon
Development Company, L.L.C.
---------------------------------------------------
Notary Public, State of Texas
My Commission Expires: Notary's Name Printed:
- -------------------------- ---------------------------------------------------
THE STATE OF TEXAS []
[]
COUNTY OF _____________ []
This instrument was acknowledged before me on the _____ day of
________________, 1998, by _______________________, as ______________________ of
_____________________.
---------------------------------------------------
Notary Public, State of Texas
My Commission Expires: Notary's Name Printed:
- -------------------------- ---------------------------------------------------
<PAGE>
EXHIBIT 2.03
ASSET TRANSFER AGREEMENT
--------------------------
This ASSET TRANSFER AGREEMENT ("Agreement") dated as of March 31, 1998, is
between TAURUS OPERATING, INC., a _________ company with offices at
_____________________________ ("Seller") and VECTOR ENERGY CORPORATION, a Texas
corporation, whose address is 5599 San Felipe, Suite 620, Houston, Texas 77056,
("Buyer").
In consideration of the mutual covenants and agreements contained herein,
the benefits to be derived by each party hereunder, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Seller and Buyer agree as follows:
ARTICLE 1. TRANSFER OF ASSETS
1.1 The Properties. Subject to the terms and conditions of this Agreement,
---------------
Seller agrees to transfer and convey to Buyer, and Buyer agrees to acquire from
Seller, effective as of 7:00 a.m. Central Standard Time, on April 1, 1998 (the
"Effective Date"), at the location of the respective properties (the "Effective
Time") all of Seller's right, title, and interest in and to the following:
(a) The oil, gas and mineral leases and the leasehold estates created
thereby, described in Exhibit "A" attached hereto (the "Leases"), insofar as the
Leases cover and relate to the land and depths described in Exhibit "A" (the
"Land"), together with corresponding interests in and to all the property and
rights incident thereto, including, all rights in any pooled or unitized acreage
by virtue of the Land being a part thereof, all production from the pool or unit
allocated to any such Land, and all interests in any wells within the pool or
unit associated with the Land;
(b) The oil and/or gas wells described on Exhibit "A" (the "Wells")
together with all personal property, equipment, fixtures, and improvements
located on and appurtenant to the Leases insofar as they relate to the
production, treatment, sale, or disposal of hydrocarbons or water produced from
or attributable to the Wells;
(c) To the extent transferable by Seller without material restriction
under applicable law or third-party agreements (without the payment of any funds
or consideration), all contracts and contractual fights, obligations, and
interests, including all farmout and farmin agreements, operating agreements,
production sales and purchase contracts, saltwater disposal agreements, surface
leases, division and transfer orders, and other contracts or agreements covering
or affecting any or all of the interests described or referred to above (the
"Contracts");
(d) All easements, rights-of-way, licenses, authorizations, permits, and
similar rights and interests applicable to, or used or useful in connection
with, any or all of the above-described interests;
(e) All oil, condensate, natural gas liquids, and other minerals produced
after the Effective Time attributable to Seller's interest in the Properties;
(f) Subject to the terms and conditions contained herein, including,
without limitation, Section 3.1 hereof, all notes and accounts receivable of
Seller, whether recorded or unrecorded, billed or not billed, or assigned for
collection, accrued and existing up to and subsequent to the Effective Time;
(g) Cash in Seller's bank account on the date prior to the Effective Date;
and
(h) All proceeds, regardless of when received, generated from the sale of
oil and/or gas attributable to production from the Properties prior to the
Effective Date.
All of the above real, personal, tangible, and intangible properties,
rights, titles, and interests described in subparagraphs (a) through (h) above,
subject to the limitations and terms expressly set forth herein and in the
Exhibit "A" attached hereto, are hereinafter collectively called the
"Properties" or, individually, a "Property".
1.2 Excluded Assets. The following items, which are related to the
-----------------
Properties are not intended by the parties to be a part of the transfer
contemplated hereunder and are specifically excluded from the Properties:
(a) Those items specifically described on Schedule 1.2(b) hereto.
All other assets of Seller associated with or employed in the business
operations of Seller, whether or not scheduled or described herein, are not
expressly included in the Properties to the conveyed to Buyer pursuant to this
Agreement.
1.3 Assumed Liabilities. As of the Effective Date, Buyer agrees to assume
--------------------
the future payment and performance of the following liabilities and obligations
of Seller, whether known or unknown, fixed or contingent, recorded or unrecorded
(collectively, the "Assumed Liabilities"):
(a) The Contracts;
(b) All notes payable, indebtedness, royalty payments, or other
obligations, liabilities, and guarantees of Seller whether or not accrued on or
before the Effective Date as set forth in Schedule 1.3(b) attached hereto and
incorporated herein by reference;
(c) All of Seller's current liabilities as set forth in Schedule 1.3(c)
attached hereto and incorporated herein by reference; and
(d) Such other liabilities of Seller as Buyer expressly elects to assume
in writing.
Buyer shall indemnify and hold each of Seller and Seller Group harmless
from all suits, actions, losses, damages, claims, or liabilities of any
character, type, or description whatsoever, including, without limitation, all
expenses of litigation, court costs, and attorney's fees, relating to or arising
out of the Assumed Liabilities and/or Buyer's assumption of the payment or
performance of any of the Assumed Liabilities, WHETHER OR NOT SUCH SUITS,
ACTIONS, LOSSES, DAMAGES, CLAIMS, OR LIABILITIES ARE THE DIRECT OR INDIRECT
RESULT OF THE NEGLIGENCE, GROSS NEGLIGENCE, OR STRICT LIABILITY OR SELLER OR
SELLER GROUP.
ARTICLE 2. PURCHASE AND DELIVERY OF STOCK
2.1 Purchase of Stock. Upon the basis of the representations and
--------------------
warranties and on the terms and subject to the conditions set forth in this
Agreement, in consideration of the sale and delivery of the Properties from
Seller to Buyer and of Buyer's assumption of the Assumed Liabilities, Buyer
hereby agrees to accept 333,000 shares of Buyer's common stock of Sunburst
Acquisition II, Inc., a Colorado corporation ("Sunburst"), at Closing
(hereinafter defined) and on the Closing Date (hereinafter defined) as provided
in Article 9 hereof. Within twenty-four (24) months following Closing, Buyer
shall make a best efforts attempt to enhance the Properties. At the earlier of
the first day of the month following the time at which the Properties have
200,000 barrels of proved producing oil reserves as determined by the Buyer's
reservoir engineers or twenty-four (24) months following Closing, Buyer shall
deliver to Seller an additional 100,000 shares of the common stock of Sunburst.
ARTICLE 3. USE OF PROCEEDS
3.1 Proceeds from Production.
------------------------
(a) All proceeds of production received by Seller or for Seller's account
which are attributable to the production of oil and/or gas prior to the
Effective Date shall be immediately deposited by Buyer into Seller's bank
account at the Bank. All such proceeds, to-ether with all cash in Seller's
account as of the Effective Date, shall be used by Buyer solely for the payment,
satisfaction, and discharge of the Assumed Liabilities until such time as all of
the Assumed Liabilities have been paid, satisfied, and discharged in full by
Buyer.
(b) All proceeds, revenues, funds and other income generated by Buyer from
the operation of, production from, or sale of the Properties or otherwise shall
be immediately deposited by Buyer unto an escrow account established at the
Bank. All such proceeds, revenues, funds, and income shall be used by Buyer
solely for the payment and discharge of all of the Assumed Liabilities until
such time as all of the Assumed Liabilities have been paid and discharged in
full by Buyer or Buyer has made arrangements, subject to the approval and
satisfaction of Seller, for the good faith and diligent discharge or contesting
of any such Assumed Liabilities.
(c) In the event Buyer fails to fully comply with, perform, and carry out
Buyer's duties and responsibilities as set forth in this Article 3 or Seller
receives notice of any claim against Seller for the payment or satisfaction of
any of the Assumed Liabilities, then, upon delivery of notice by Seller to Buyer
of such claim and Buyer's continued failure to fully pay, satisfy, and discharge
such claim or failure to commence with the good faith and diligent contesting of
such claim for a period of thirty (30) days, Seller shall have the right, but
not the obligation, at no additional cost and expense to Seller, to re-take
immediate possession of the Properties, and Buyer agrees to fully cooperate with
Seller and take such additional acts and execute and deliver such other
instruments as Seller may request in order to re-convey and re-transfer full
right, title, and interest to, vest in, and place Seller in legal and actual
possession of the Properties.
(d) Buyer shall indemnify and hold each of Seller and Seller Group
harmless from all suits, actions, losses, damages, claims, or liabilities of any
character, type, or description whatsoever, including without limitation, all
expenses of litigation, court costs, and attorney's fees, relating to or arising
out of the Assumed Liabilities, Buyer's assumption of the payment or performance
of any of the Assumed Liabilities, and/or the performance of Buyer's duties,
obligations, and responsibilities with respect to any of the Assigned
Liabilities as provided in this Article 3 or otherwise, whether or not such
suits, actions, losses, damages, claims, or liabilities are the direct or
indirect result of the negligence, cross negligence, or strict liability or
Seller or Seller Group.
ARTICLE 4. REPRESENTATIONS OF SELLER
4.1 Existence. Seller is a limited liability company duly organized,
----------
validly existing, and in good standing under the laws of the state of its
organization, and is duly qualified to do business in the states in which the
Properties are located.
4.2 Authorization. Seller has all authority necessary to enter into this
--------------
Agreement and to perform all its obligations hereunder. This Agreement has been
duly executed and delivered on its behalf; and at the Closing all documents and
instruments required hereunder will have been duly executed and delivered. This
Agreement, and all such documents and instruments shall constitute legal, valid,
and binding obligations enforceable in accordance with their respective terms,
except to the extent enforceability may be affected by bankruptcy,
reorganization, insolvency, or similar laws affecting creditors' rights
generally.
4.3 Power. Subject to preferential purchase rights and restrictions on
------
assignment of the type typically found in the oil and gas industry as set forth
in Schedule 4.3 attached hereto and incorporated herein by reference, Seller's
execution, delivery, and performance of this Agreement and the transactions
contemplated hereby will not: (i) violate or conflict with any provision of its
certificate of organization, regulations, or other governing documents; (ii)
result in material breach of any term or condition of, or constitute a default
or cause the acceleration of any obligation under -any agreement or instrument
to which it is a party or by which it is bound; or (iii) violate or conflict
with any applicable judgment, decree, order, permit, law, rule or regulation.
4.4 Brokers. Seller has incurred no liability, contingent or other-wise,
--------
for broker's or finder's fees in respect of this transaction, for which Buyer
shall have any responsibility whatsoever.
4.5 Foreign Person. Seller is not a "foreign person*' within the meaning
---------------
of the Internal Revenue Code of 1986, as amended (the "Code"), Section 1445 and
7701 (i.e. Seller is not a nonresident alien, foreign corporation, foreign
partnership, foreign trust, or foreign trust, or foreign estate as those terms
are defined in the Code and any regulations promulgated thereunder).
4.6 Litigation. Except as set forth on Schedule 4.6, there are no lawsuits
-----------
directly involving the Properties with respect to which Seller has received
service of process, and to the best of Seller's knowledge, there are no lawsuits
with respect to Seller which Would have a Material Adverse Effect on the
Properties.
4.7 Taxes and Assessments. Seller has caused to be timely filed all
-----------------------
material tax returns relating to the Properties. Seller has caused to be paid or
provided for all ad valorem, property, production, severance and similar taxes
based upon or measured by the ownership of or the production of Hydrocarbons
from the Properties required to be shown on such returns, except those being
contested in good faith. Seller has not received written notice of any pending,
claim against Seller from any applicable taxing authority for assessments of
taxes with respect to the Properties.
4.8 Outstanding Capital Commitments. As of the Effective Time, there were
--------------------------------
no outstanding AFEs or other commitments to make capital expenditures which are
binding on the Properties and which Seller reasonably anticipates will
individually require expenditures by the owner of the Properties after the
Effective Time in excess of $50,000 other than those shown on Schedule 4.8
-------------
hereto.
4.9 Contracts. Except as disclosed on the Schedule 4.9, Seller has paid
----------
its shares of all costs payable by it under the Leases and Contracts, except
those being contested in good faith. Neither Seller, nor to the knowledge of
Seller, any other part is in default under any Contract except as disclosed on
Schedule 4.9 and except such defaults as would not, individually or ------------
the aggregate, have a Material Adverse Effect. Except as disclosed in Schedule
- -------- 4.9, there are no Contacts with affiliates of Seller which will be
binding on --- the Properties after Closing. --
4.10 Gas Imbalances. Except with respect to the Properties set forth on
----------------
Schedule 4.10, as of the Effective Time, Seller has no gas imbalances with
co-owners of the Properties.
4.11 Compliance with Laws. The execution and performance of this Agreement
---------------------
by Buyer does not violate any law or regulation of any jurisdiction or
governmental body or agency and does not require approval of, or filing with,
any governmental body or agency.
4.12 Representations. Statements and Certificates. No representation by
----------------
Seller, nor any statement or certificate furnished or to be furnished by Seller
pursuant to this Agreement, or in connection with the transactions contemplated
herein, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained therein not misleading.
ARTICLE 5. REPRESENTATIONS OF BUYER
5.1 Existence. Buyer is a corporation duly organized, validly existing,,
----------
and in good standing under the laws of the state of its incorporation, and is
duly qualified to do business in the states in which the properties are located.
5.2 Authorization. Buyer has all authority necessary to enter into this
--------------
Agreement and to perform all its obligations hereunder. This Agreement has been
duly executed and delivered on its behalf, and at the Closing all documents and
instruments required hereunder will have been duly executed and delivered. This
Agreement, and all such documents and instruments shall constitute legal, valid,
and binding obligations enforceable in accordance with their respective terms
except to the extent enforceability may be affected by bankruptcy,
reorganizations, insolvency, or similar laws affecting creditors' rights
generally.
5.3 Power. Buyer's execution, delivery, and performance of this Agreement
------
and the transactions contemplated hereby will not: (i) violate or conflict with
any provision of its certificate of incorporation, by-laws, or other governing
documents; (ii) result in the breach of any term or condition of, or constitute
a default or cause the acceleration of any obligation under any agreement or
instrument to which it is a party or by which it is bound; or (iii) violate or
conflict with any applicable judgment, decree, order, permit, law, rule, or
regulation.
5.4 Brokers. Buyer has incurred no liability, contingent or otherwise, for
--------
broker's or finder's fees in respect of this transaction, for which Seller shall
have any responsibility whatsoever.
5.5 Further Distribution. Buyer (i) has such knowledge and experience in
----------------------
business, financial, and oil and gas matters that it is capable of evaluating
the merits and risks of entering into and of carrying out its obligations in
connection with the acquisition of the Properties in the manner contemplated
herein; (ii) has received to date all information concerning the Properties and
such other information relating to this Agreement which it requested; and (iii)
is able to bear the economic risk of its investment in the Properties for an
indefinite period of time. Further, Buyer acknowledges that Seller is relying
upon the representations contained in the foregoing sentence and that absent
such representations the proposed sale to Buyer would not be entered into and
this Agreement would not be executed and delivered by Seller.
5.6 Effective Agreement. The execution, delivery, and performance of this
--------------------
Agreement by Buyer and the consummation of the transactions contemplated hereby
do not require the consent, -waiver, approval, or authorization of any person or
public authority; do not result in a violation of any material breach of any
law, rule, or regulation applicable to Buyer, and do not conflict with or result
in a breach of any of the governing instruments of Buyer or, with or without the
giving of notice and/or the passage of time, any mortgage, deed of trust,
license, indenture, or other instrument or agreement, or any order, judgment, or
other restriction of any kind or character to which Buyer is a party.
5.7 Litigation. Except as set forth in Section 5.6, attached hereto and
----------- -----------
incorporated herein by this reference, Buyer is not a party to or threatened by
any litigation, proceeding, or controversy before any court, governmental body,
or administrative agency which would have a Material Adverse Effect on the
transactions contemplated under this Agreement.
5.8 Compliance with Laws. The execution and performance of this Agreement
----------------------
by Buyer does not violate any law or regulation of any jurisdiction or
governmental body or agency and does not require approval of, or filing with,
any governmental body or agency.
5.9 Preferred Stock. At Closing Buyer will own all of the shares of
-----------------
Preferred Stock free and clear of any claims, liens, charges, or encumbrances
whatsoever, and has good and marketable title to its shares of Preferred Stock
and has full right, power, and authority to sell the shares of Preferred Stock
to Seller as provided herein without obtaining the consent or approval of any
other person or governmental authority.
5.10 Representations, Statements and Certificates. No representation by
-----------------------------------------------
Buyer, nor any statement or certificate furnished or to be furnished by Buyer
pursuant to this Agreement, or in connection with the transactions contemplated
herein, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained therein not misleading.
5.11 Representation and Warranties as to Sunburst. Buyer hereby represents
---------------------------------------------
and warrants as to the following:
(a) Sunburst is duly organized, validly existing, and in good standing
under the laws of its incorporation and is duly qualified and in good standing
to transact business in each jurisdiction in which the nature of its business
requires such qualification;
(b) All outstanding shares of capital stock, including, without
limitation, the Preferred Stock, of Sunburst have been duly authorized and
validly issued and are fully paid, non-assessable, and are not subject to any
preemptive or similar rights; and
(c) Sunburst is a reporting company under the Securities Exchange Act of
1934, as amended (the "1934 Act"), and has duly and timely made all required
filings with the Securities and Exchange Commission as required pursuant to the
1934 Act.
ARTICLE 6. DISCLAIMER OF WARRANTIES
6.1 Information Provided. All the information, statistics, summaries, and
---------------------
facsimiles furnished by or on behalf of Seller herewith or hereunder are
furnished or will be furnished for Buyer's use at Buyer's sole risk. All such
information has been compiled or prepared by Seller based upon its files and
records and such information is believed to be correct, but Seller makes no
representation or warranty, express or implied, as to the accuracy, correctness,
completeness, or the adequacy of same and does not warrant or guarantee such
information in any way. Seller has made no statements or representations
concerning the environmental condition of the properties, production rates,
recompletion opportunities, decline rates, geological or geophysical data or
interpretations, the quality, quantity, recoverability or cost of recovery of
any hydrocarbon reserves, any product pricing assumptions, the ability to sell
or market any hydrocarbons after Closing, or the present or future value of the
anticipated income, costs, or profits, if any, to be derived from the
properties. Buyer is responsible for making such independent investigation and
evaluation of the properties as Buyer shall deem appropriate, realizing that
Seller does not assume and shall have no liability to Buyer or any other party
whatsoever for any reliance which may be placed on the information, statistics,
summaries, or facsimiles furnished herewith or hereunder or any statements made
herein. Specifically, but without limiting the generality of the foregoing:
(i) The description of leases included in the properties, the acreage
purported to be covered thereby, depth limitations (if any),
royalty and other burdens affecting same, and quantum of interest
have been derived strictly from Seller's records and seller has
not undertaken any examination of title to verify same. Seller
does not warrant title to the Properties, except as against
parties claiming, by, through, or under Seller, and Buyer should
therefore undertake such independent title examination as it
deems appropriate prior to closing; and
(ii) The description of wells and equipment included in the properties
has been compiled strictly from Seller's records rather than from
an on-the-ground inventory. Prior to Closing, Buyer should
undertake such independent inspection or inventory as it deems
appropriate to determine whether the equipment so described is in
fact in place.
6.3 No Warranties. Conveyance of the properties will be made without
---------------
representations or warranties, express or implied in fact or in law, as to
merchantability, durability, use, operation, fitness for any particular purpose,
condition, safety of the properties, compliance with regulatory and
environmental requirements or otherwise.
6.4 Buyer Inspection. Buyer hereby agrees that it will inspect the
------------------
properties, including, without limitation, the leases and the contracts, wells
personal property, and equipment assigned and conveyed herein and that it will
accept the same "AS IS, WHERE IS" and "WITH ALL FAULTS". Buyer releases Seller
Group (as defined herein) from all Losses (as defined herein) with respect to
- -the properties, whether or not caused by or attributable to Seller's negligence
and whether or not arising from or in connection with or during the period of
Seller's ownership or use of the properties. Without limiting the above, Buyer
waives its right to recover from Seller Group and forever releases and
discharges Seller Group from any and all losses, penalties, fines, liens,
judgments, costs and expenses whatsoever (including, without limitation,
attorney's fees and costs), whether direct or indirect, known or unknown,
foreseen or unforeseen, that may arise on account of or in any way be connected
with the physical condition of the properties or any law or regulation
applicable thereto, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as Amended (42
U.S.C. 9601 Et. Seq.), the Clean Water Act (33 U.S.C. 466 Et. Seq.), the Safe
-- --- -- ---
Drinking Water Act (14 U.S.C. 1401-1450), the Hazardous Materials Transportation
Act (49 U.S.C. 1801 Et. Seq.), the Toxic Substance Control Act (15 U.S.C. 2601
-- ---
- -2629) and all applicable state or local laws.
6.5 Prior Operations. Buyer hereby acknowledges that the Properties have
-----------------
been utilized for the purpose of production and development of oil and gas and
that there may have been spills of wastes, crude oil, produced water or other
materials in the past onto the Properties or in connection therewith. In
addition, some oil field production equipment may contain asbestos or naturally
occurring radioactive material (hereinafter referred to as "NORM"). In this
regard Buyer expressly understands the NORM may affix or attach itself to the
inside of wells, materials and equipment as scale, or in other forms, and that
said wells, materials and equipment located on the Properties or included
therein may contain NORM and that NORM-containing, material may be buried or
otherwise disposed of on the Properties. Buyer also expressly understands that
special procedures may be required for the remediation, removal, transportation
and disposal of asbestos and NORM from the Properties where it may be found, and
Buyer assumes all responsibility and liability for or in connection with
assessment, remediation, removal, transportation, and disposal of any such
materials and associated activities in accordance with all rules, regulations
and requirements of governmental agencies.
ARTICLE 7. SELLER'S CONDITIONS OF CLOSING
The obligation of Seller to close this transaction shall be subject to and
conditioned upon the following any one or more of which may be waived by Seller,
in whole or in part:
7.1 Representations. The representations of Buyer under Article 5 of this
----------------
Agreement shall be true and accurate in all material respects as of the date
when made and shall be deemed to be made again at and as of the time of the
Closing and shall then be true and accurate in all material respect.
7.2 Performance. Buyer shall have performed and complied with each
------------
covenant, agreement, and condition required by this Agreement to be performed or
complied with by it prior to or at Closing.
7.3 Pending Matters. At Closing, no litigation, proceeding, investigation,
----------------
or inquiry shall be pending or threatened to enjoin or prevent the consummation
of the transactions contemplated by this Agreement.
7.4 Bonds. Where applicable, Buyer shall have furnished evidence
------
satisfactory to Seller that Buyer has obtained any requisite plugging bonds and
other assurances required by governmental authorities having jurisdiction,
including where applicable, qualification to assume operatorship.
7.5 Certificate of Designation. Buyer shall have filed with the Secretary
---------------------------
of State of the State of Colorado a Certificate of Designation in substantially
the form as set forth on Schedule 7.5, attached hereto and incorporated herein
------------
by reference, setting forth the rights, preferences, and other characteristics
of the Preferred Stock.
7.6 Public Shell Acquisition. Buyer shall have entered into a definitive,
-------------------------
written agreement with Sunburst to acquire approximately 600,000 shares of
common stock of Sunburst, constituting, approximately ninety percent (90%) of
all of the issued and outstanding shares of voting capital stock of Sunburst.
ARTICLE 8. BUYER'S CONDITIONS OF CLOSING
The obligation of Buyer to close this transaction shall be subject to and
conditioned upon the following, any one or more of which may be waived by Buyer,
in whole or in part:
8.1 Representations. The representations of Seller under Article 4 of this
----------------
Agreement shall be true and accurate in all material respects as of the date
when made and shall be deemed to be made again at and as of Closing and shall
then be true and accurate in all material respects.
8.2 Performance. Seller shall have performed and complied with each
------------
material covenant, agreement, and condition required by this Agreement to be
performed or complied with by Seller prior to or at the Closing.
8.3 Pending Matters. At Closing, no suit or action shall have been
-----------------
instituted or threatened that questions or reasonably appears to adversely
materially affect the validity or legality of this Agreement or the transactions
contemplated by this Agreement.
ARTICLE 9. CLOSING
9.1 Time and Place of Closing. Subject to the conditions stated in this
--------------------------
Agreement, the consummation of the transactions contemplated hereby (the
"Closing") shall occur on April 1, 1998 (the "Closing Date"); provided, however,
that if all of the conditions to Closing set forth in Articles 10 and 11 have
not been satisfied or waived by such date or any extended date for Closing the
party whose obligations are subject to the conditions that have not been
satisfied or waived shall have the right to extend the date of Closing for
successive periods of up to seven days each until such conditions shall have
been satisfied or waived. The Closing shall be held at
____________________________, or at such other location as may be mutually
agreed upon by Seller and Buyer.
9.2 Closing Obligations.
--------------------
(a) At Closing, Seller shall deliver to Buyer the following:
(i) Executed Assignment, Bill of Sale and Conveyance of the
Properties, in the form attached hereto as Exhibit "B";
(ii) Resignations of Seller's operator of any of the Properties of
which Seller is operated;
(iii) Possession of the Properties; and
(iv) assignments of the Leases, duly executed by Seller;
(v) letters-in-lieu of transfer orders concerning the Properties,
duly executed by Seller;
(vi) an executed statement described in Treasury Regulation Section
1.1445-2(b)(2) certifying that Seller is not a "foreign person"
within the meaning of the Internal Revenue Code of 1986, as
amended; and
(vii)a certificate duly executed by a manager of Seller, dated as of
the Closing, (1) attaching, and certifying on behalf of Seller
complete and correct copies of (A) resolutions of the managers of
Seller authorizing execution, delivery, performance by the Seller
of this Agreement and the transactions contemplated hereby and
(B) any acquired approval by the members of Seller of this
Agreement and the transactions contemplated hereby; and (2)
certifying on behalf of Seller the incumbency of each officer of
Seller executing this Agreement or any document delivered in
connection with the Closing.
(b) At Closing, Buyer shall:
(i) Deliver to Seller the bearer of stock certificated representing
333,000 shares of Common Stock;
(ii) Execute the Assignment, Bill of Sale and Conveyance delivered by
Seller to Buyer at Closing, evidencing, Buyer's acceptance of
same and assumption of all obligations thereunder;
(iii)Evidence that Buyer has obtained any requisite plugging bonds
and other assurances required by governmental authorities having
jurisdiction, including, where applicable, qualification to
assume operatorship;
(iv) Well transfer permits, the originals of which shall be retained
by Seller for filing;
(v) letters-in-lieu of transfer orders covering the Properties, duly
executed by Buyer; and
(vi) a certificate duly executed by the secretary of Buyer, dated as
of the Closing, (1) attaching, and certifying on behalf of Buyer
as complete and correct, copies of (A) the certificate of
incorporation and bylaws of Buyer, each as in effective as of the
Closing, (B) the resolutions of the Board of Directors of Buyer
authorizing execution, delivery, and performance by Buyer of this
Agreement and the transactions contemplated hereby, and (C) any
required approval by the stockholders of Buyer of this Agreement
and the transactions contemplated hereby; and (2) certifying on
behalf of Buyer the incumbency of each officer of Buyer executing
this Agreement or any document delivered in connection with the
Closing.
9.3 Further Assurances. The parties shall execute, acknowledge, and
--------------------
deliver any other documents and shall take such other actions as may be
reasonably necessary to carry out their obligations under this Agreement.
9.4 Simultaneous Closing. The delivery of all documents and actions taken
----------------------
at the Closing shall all be considered parts of a simultaneous transaction and
no delivery of documents or action taken shall be considered completed until all
documents for such Closing have been delivered and other action taken.
ARTICLE 10. ADDITIONAL AGREEMENTS
10.1 Notices. All notices hereunder shall be in writing and any
--------
communication or delivery hereunder shall be deemed to have been duly made when
personally delivered to the individual -indicated below, or if mailed, when
received by the party charged with such notice and addressed as follows:
SELLER Taurus Operating, Inc.
------
P. O. Box 50076
Midland, Texas 79710
BUYER: Vector Energy Corporation
-----
5599 San Felipe, Suite 620
Houston, Texas 77056
Attn: Mr. Steve Nosier, President
Any party may, by written notice so delivered to the other, change the address
of the individual to which or to whom delivery shall thereafter be made.
10.2 Recording, Documents. Buyer shall pay all transfer, documentary,
----------------------
filing, and recording fees incurred in connection with the filing and recording
of the instruments of conveyance. As soon as practicable after Closing, Buyer
shall provide Seller with copies of all recorded documents conveying the
Properties to Buyer.
10.3 Right of Termination.
---------------------
(a) This Agreement and the transactions contemplated hereby may be
terminated in the following instances:
(i) By Seller if any of the conditions set forth in Article 7 are not
satisfied in all material respects or waived as of the Closing Date;
(ii) By Buyer if any of the conditions set forth in Article 8 are not
satisfied in all material respects or waived as of the Closing Date;
or
(iii) At any time by the mutual written agreement of Buyer and Seller.
(b) In the event of the termination of this Agreement by Seller in
accordance with Section 10.3(a)(i), Seller shall have no liability hereunder of
any nature whatsoever to Buyer, including any -liability for damages. If Buyer
terminates this Agreement in accordance with Section 10(' ))(a)(i) above, it
shall have no liability hereunder of any nature whatsoever to Seller including
any liability for damages. If Buyer terminates this Agreement other than in
accordance with Section 10(3)(a)(ii), or if Seller terminates this Agreement in
accordance with Section 10(3)(a)(ii), Seller shall retain the Deposit with all
interest earned thereon and Buyer shall have no further liability hereunder of
any nature whatsoever to Seller including any liability for damages.
(c) Except as provided above in this Section 10.3(b), nothing contained
herein shall be construed to limit Seller's or Buyer's legal or equitable
remedies in the event of breach of this Agreement.
10.4 Operation of Business. Until the Closing, Buyer will (i) operate the
----------------------
Properties in the ordinary course, (ii) will not, without the prior written
consent of Seller, which consent shall not be unseasonably withheld, commit to
any operation reasonably anticipated by Buyer to require future capital
expenditures by the owner of the Properties in excess of $10,000 or make any
capital expenditures in excess of $10,000 except for matters set forth on
Schedule 4.8, or terminate, materially amend, execute or extent any material
agreements affecting the Proper-ties, (iii) will maintain general insurance
coverage on the Properties furnished by nonaffiliated third parties in the
amounts and of the types presently in force, (iv) will use commercially
reasonable efforts to maintain in full force and effect all Leases, (v) will
maintain all material governmental permits and approvals affecting the
Properties, and (vi) will not transfer, sell, hypothecate, encumber or otherwise
dispose of any material Properties except for sales and dispositions of oil and
gas production and Equipment made in the ordinary course of business consistent
with past practices. Seller's approval of any action restricted by this Section
10.4 shall be considered granted within 10 days (unless a shorter time is
reasonably required by the circumstances and such shorter time is specified in
Buyer's notice) of Buyer's notice to Seller requesting such consent unless
Seller notifies Buyer to the contrary during that period. In the event of an
emergency, Buyer may take action as a prudent operator would take and shall
notify Seller of such action promptly thereafter.
10.5 Indemnify Regarding Access. Buyer agrees to indemnify, defend and hold
---------------------------
harmless Seller and the Seller Group from and against any and all claims,
liabilities, losses, costs and expenses attributable to personal injuries,
death, or property damage, arising out of or relating to access to the
Properties and to the records and other related information prior to the Closing
by Buyer and the Seller Group, EVEN IF CAUSED IN HOLE OR IN PART BY THE
NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL
FAULT OR ANY OF SELLER OR THE SELLER GROUP.
ARTICLE 11. ASSUMPTION OF OBLIGATIONS; INDEMNIFICATION
11.1 Definitions. As used in this Agreement:
------------
(a) "Losses" means any liabilities, losses, claims, demands, causes of
action, costs and expenses (including, but not limited to, court costs and
reasonable attorneys' fees and other costs and -expenses incident to proceedings
or investigations respecting, or the prosecution or defense of, a claim) of
every kind and character.
(b) "Material Adverse Effect" means any material adverse change in the
condition (financial or otherwise), business, operations, properties, prospects,
assets or liabilities, of Seller in the aggregate (whether or not covered by
insurance).
(c) "Seller Group" means Seller and its managers, members, officers,
directors, contractors, agents, employees, attorneys, accountants, professional
advisors, and representatives.
11.2 Assumption of Contracts. The sale of the Properties is and will be
--------------------------
made subject to the Contracts to, which the Properties are presently subject.
Buyer shall assume and be responsible for all obligations accruing under the
Contracts as of and after the Effective Time.
11.3 Imbalances. Buyer shall accept all gas and oil imbalances as set forth
-----------
on Schedule 11.3 attached hereto and incorporated herein by reference and shall
assume all responsibility to settle with other interest owners for any such
disclosed over or under gas or oil imbalances that exist on the Properties. If
the gas or oil imbalance on a particular Property is a net liability, Buyer
shall defend, indemnify, and hold Seller harmless for that net liability. For
purposes hereof, an "imbalance" shall include any circumstance regarding
production taken or marketed from the Properties which could result in (i) a
portion of Buyer's interest in such production being sold without Buyer
receiving payment therefor; or (ii) Buyer being obligated to make payment to any
person or entity as a result of such imbalance; or (iii) any other circumstance
by which Buyer would be obligated by virtue of any prepayment arrangement,
take-or-pay agreement, or similar arrangement binding on the Properties after
Closing, to deliver hydrocarbons produced from the Properties at some future
time without then receiving full payment therefor.
11.5 Buyer's General Indemnity. Buyer hereby agrees to assume all
-----------------------------
responsibility for the wells, the casing, and all other leasehold equipment in
and on said wells, and all other personal property and fixtures used on or in
connection with the Leases before, on, and after the Effective Time. Buyer
agrees to defend, indemnify, and hold Seller Group harmless from and against any
and all Losses arising out of, incident to, or in connection with the
Properties, operations on the Properties, arising and occurring before, on, or
after the Effective Time.
11.6 Operations Prior to Closing. Seller hereby releases Buyer, and agrees
----------------------------
to indemnify, defend and hold Buyer harmless, from all Losses with respect to
continued operations by Buyer under Section 10.4, WHETHER OR NOT CAUSED IN WHOLE
OR IN PART BY, AND INCLUDING, AND SOLE OR CONCURRENT NEGLIGENCE OR STRICT
LIABILITY OF BUYER, UNLESS CAUSED BY BUYER'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
11.7 Buyer's Environmental Indemnification. Except as to the
--------------------------------------------
indemnification, if any, provided under Section 11.5, Buyer, its successors and
assigns, hereby agree to indemnify against, and defend and hold Seller Group
harmless from all Losses (including but not limited to any civil fines,
penalties, expenses, costs of clean-up or remediation, and plugging liabilities
for any and all wells) brought by any and all persons, including, but not
limited to, Buyer's and Seller's employees, agents, or representatives and also
any private citizens, persons, or organizations and any agency, branch, or
representative of federal, state, or local government, on account of any
personal injury, disease, or death or any damage, destruction, loss of property
or contamination of natural resources (including air, soil, surface water, or
ground water) resulting from, arising out of any liability caused by, or
connected with any environmental condition of, on, or resulting from the
Properties before, on, or after the Effective Time, including, but not limited
to, the presence, disposal, or release of any material of any kind in, on or
under the Properties or other affected property, or at any time caused by or
connected with acts or omissions of any party's employees, representatives, or
agents with regard to the use, ownership, or operatorship of the Properties.
BUYER'S INDEMNIFICATION SHALL EXTEND TO AND INCLUDE (i) THE NEGLIGENCE OF SELLER
GROUP, BUYER, AND PARTIES ACTING ON BEHALF OF BUYER, WHETHER SUCH NEGLIGENCE IS
ACTIVE OR PASSIVE, JOINT, SOLE, OR CONCURRENT, AND (ii) BUYER'S STRICT
LIABILITY. This indemnification shall be in addition to any other indemnity
provisions contained in this Agreement, and it is expressly understood and
agreed that any terms of this Section 11.7 shall control over any conflicting or
contradicting terms or provisions contained in this Agreement, except control
over any conflicting or contradicting terms or provisions contained in this
Agreement, except as to the indemnity, if any, provided under Section 11.5.
11.8 Buyer's Plugging Liability. Buyer shall properly plug and abandon at
----------------------------
Buyer's sole cost and expense all wells herein assigned or located on the
Properties and shall clean and restore the surface at Buyer's expense and in
accordance with the applicable Lease provisions and state and federal rules and
regulations pertaining to the plugging and abandoning of such wells and the
restoration of such surface. Buyer shall indemnify, defend, and hold Seller
Group harmless from and against all Losses as a result of Buyer's failure to
comply with the provisions of this Section 11.8.
ARTICLE 12. ARBITRATION
12.1 Selection of Arbitrators. Any controversy between the parties hereto
-------------------------
arising under this Agreement and not resolved by agreement shall be determined
by a board of arbitration upon notice of submission given by either party to the
other, which notice shall name a qualified, independent arbitrator. Within ten
(10) days after the receipt of such notice, the other party shall name a
qualified, independent arbitrator, of failing to do so the party giving notice
shall name the second. The two arbitrators so appointed shall name the third
qualified, independent arbitrator, or failing, to do so, the third arbitrator
may be appointed by the Senior Judge (in service) of the United States District
Court for the Southern District of Texas.
12.2 Determination. The arbitrators selected to act hereunder shall be
--------------
qualified by education and experience to pass on the particular question in
dispute. The arbitrators shall promptly -hear and determine (after due notice of
hearing and giving the parties a reasonable opportunity to be heard) the
questions submitted, and shall render their decision within sixty days after
appointment of the third arbitrator. If within said period a decision is not
rendered by the board, or majority thereof, new arbitrators may be named and
shall act hereunder at the election of either Buyer or Seller in like manner as
if none had been previously named.
12.3 Decision Binding. The decision of the arbitrators, or the majority
------------------
thereof, made in writing shall be final and binding, upon the parties hereto as
to the questions submitted, and Buyer and Seller will abide by and comply with
such decision. The expenses of arbitration, including reasonable compensation to
the arbitrators, shall be borne equally by the parties hereto, except that each
party shall bear the compensation and expenses of its own counsel, witnesses,
and employees.
ARTICLE 13. MISCELLANEOUS
13.1 Amendment. This Agreement may not be amended nor any rights hereunder
----------
waived except by an instrument in writing signed by the party to be charged with
such amendment or waiver and delivered by such party to the party claiming the
benefit of such amendment or waiver.
13.2 Gender. References made in this Agreement, including use of a pronoun,
-------
shall be deemed to include where applicable, masculine, feminine, singular or
plural, individuals, partnerships, or corporations. As used in this Agreement,
"person" shall mean any natural person, corporation, limited liability company,
partnership, trust, estate, or other entity.
13.3 Entire Agreement. This Agreement constitutes the entire understanding
-----------------
among the parties with respect to the subject matter hereof, superseding all
negotiations, prior discussions, and prior agreements and understandings
relating to such subject matter.
13.4 Successors and Assigns. This Agreement shall be binding upon and shall
-----------------------
inure to the benefit of, the parties hereto and, except as otherwise prohibited,
their respective successors and assigns; and except as otherwise stated herein,
nothing contained in this Agreement, or implied herefrom, is intended to confer
upon any other person or entity any benefits, rights, or remedies. This
Agreement and any rights, obligations, responsibilities, and duties of Buyer
hereunder may be assigned by Buyer with the prior written consent of Seller,
which consent shall not be unreasonably withheld, conditioned, or delayed.
13.5 Survivability. Except as otherwise specifically provided in this
--------------
Agreement, all indemnifications, covenants, agreements, representations,
guaranties, and warranties shall survive the execution of the Agreement, the
Closing, and the delivery and recordation of any deeds, assignments, or bills of
sale which convey the Properties from Seller to Buyer.
13.6 Severability. If a court of competent jurisdiction determines that any
-------------
clause or provision of this Agreement is void, illegal, or unenforceable, the
other clauses and provisions of the -Agreement shall remain in full force and
effect and the clauses and provisions which are determined to be void, illegal,
or unenforceable shall be limited so that they shall remain in effect to the
extent permissible by law.
13.7 Governing Law. This Agreement shall be governed by and construed under
--------------
the laws of the State of Texas (excluding any conflict of laws provision that
would require the application of the law of any other jurisdiction).
13.8 Section Headings. The section headings contained in this Agreement are
-----------------
for convenience only and shall not in any way affect the meaning or
interpretation of this Agreement.
13.9 Waiver. No waiver of any provision of or rights under this Agreement
-------
shall be effective unless in a writing, signed by the waiving party. No waiver
of any specified right or provision shall be construed as a waiver of any other
right or provision.
The parties have executed this Agreement as of the date first above mentioned.
SELLER:
TAURUS OPERATING, INC.
By:
-------------------------------------------------------
Ricky W. Patterson, Vice President
BUYER:
Vector Energy Corporation
By:
--------------------------------------------------------
Name:
--------------------------------------------------------
Title:
--------------------------------------------------------
<PAGE>
EXHIBIT "A"
Attached to and made a part of that certain Purchase and Sale Agreement
between Lisbon Development Company, L.L.C. and Vector Energy Corporation
dated March 23, 1998
DESCRIPTION OF LEASES BEING CONVEYED
------------------------------------
DESCRIPTION OF WELLS AND INTERESTS BEING CONVEYED
-------------------------------------------------
<PAGE>
EXHIBIT "B"
------------
Attached to and made a part of that certain Purchase and Sale Agreement
between Lisbon Development Company, L.L.C. and Vector Energy Corporation
dated March 23, 1998
ASSIGNMENT, BILL OF SALE AND CONVEYANCE
--------------------------------------------
THE STATE OF []
------------------
[]
COUNTY OF []
----------------
Lisbon Development Company, L.L.C., a Texas limited liability company,
whose address is 1330 Post Oak Blvd., Suite 2222, Houston, Texas 77056
(hereinafter called "Assignor"), for and in consideration of the sum of Ten and
No/100 Dollars ($10.00) and other good and valuable consideration the receipt,
adequacy and sufficiency of which are hereby acknowledged, does hereby sell,
transfer, assign and convey unto ____________________________ a
______________________________________, whose address is ____________________
(hereinafter called "Assignee"), all of Assignor's right, title and interest in
and to the following:
(a) The oil, gas and mineral leases and the leasehold estates created
thereby, described in Exhibit "A" attached hereto (the "Leases"), insofar as the
Leases cover and relate to the land and depths described in Exhibit "A" (the
"Land"), together with corresponding interests in and to all the property and
rights incident thereto, including all rights in any pooled or unitized acreage
by virtue of the Land being a part thereof, all production from the pool or unit
allocated to any such Land, and all interests in any wells within the pool or
unit associated with the Land;
(b) The oil and/or gas wells described on Exhibit "A" attached hereto (the
"Wells") together with all personal property, equipment, fixtures, and
improvements located on and appurtenant to the Leases and Lands insofar as they
are used or obtained in connection with the operation of the Wells and insofar
as they cover the Lands or relate to the production, treatment, sale, or
disposal of hydrocarbons or water produced from or attributable to the Wells;
(c) To the extent transferable by Assignor without material restriction
under applicable law or third-party agreements (without the payment of any funds
or consideration), all contracts and contractual rights, obligations, and
interests, including all farmout and farmin agreements, operating agreements,
production sales and purchase contracts, saltwater disposal agreements, surface
leases, division and transfer orders, and other contracts or agreements covering
or affecting any or all of the interests described or referred to above;
(d) All easements, rights-of-way, licenses, authorizations, pen-nits, and
similar rights and interests applicable to, or used or useful in connection
with, any or all of the above-described interests; and
(e) All oil, condensate, natural gas, natural gas liquids, and other
minerals produced after the Effective Time attributable to Assignor's interest
in the Properties (as defined herein).
All of the above real and personal properties, rights, titles, and
interests described in subparagraphs (a) through (e) above, subject to the
limitations and terms expressly set forth herein and in the Exhibit "A" attached
hereto, but excluding the Excluded Property, are hereinafter collectively called
the "Properties" or, individually, a "Property".
This Assignment shall be effective as of __________________ at 7:00 a.m.
local time where each Property is located ("Effective Time").
THIS ASSIGNMENT IS MADE WITHOUT WARRANTIES, EXPRESSED 0 IMPLIED IN FACT OR
IN LAW, AS TO MERCHANTABILITY, DURABILITY, USE, OPERATION, FITNESS FOR ANY
PARTICULAR PURPOSE, CONDITION, SAFETY OF THE PROPERTY, COMPLIANCE WITH
REGULATORY AND ENVIRONMENTAL REQUIREMENTS OR OTHERWISE. ASSIGNOR DOES NOT IN ANY
WAY REPRESENT OR WARRANT THE ACCURACY OR COMPLETENESS OF ANY INFORMATION, DATA
OR OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED TO ASSIGNEE BY OR ON BEHALF OF
ASSIGNOR.
ASSIGNEE HEREBY AGREES THAT IT HAS INSPECTED OR HAS BEEN GIVEN THE
OPPORTUNITY TO INSPECT THE PROPERTY, INCLUDING THE LEASES AND ASSOCIATED
AGREEMENTS, WELLS, PERSONAL PROPERTY, AND EQUIPMENT ASSIGNED AND CONVEYED HEREIN
AND THAT IT ACCEPTS THE SAME "AS IS, WHERE IS" AND "WITH ALL FAULTS". Assignee
agrees to assume all responsibility for the wells, the casing and all other
leasehold equipment in and on said wells, and all other personal property and
fixtures used on or in connection therewith before, on and after the Effective
Time.
Assignee shall properly plug, and abandon as Assignee's expense all wells
herein assigned or located on the Property and shall clean and restore the
surface at Assignee's expense and in accordance with the applicable lease
provisions and State and Federal rules and regulations pertaining to the
plugging and abandoning of such wells and the restoration of such surface.
Assignee shall indemnify, defend and hold Assignor Group harmless from and
against all Losses as a result of Assignee's failure to comply with the
provisions of this paragraph and this Assignment.
All taxes, including but not limited to ad valorem, property, severance and
windfall profit taxes, shall be prorated between Assignor and Assignee as of the
Effective Time, with Assignor responsible for all such taxes accruing prior
thereto and Assignee responsible for all such taxes accruing thereafter.
Assignee shall bear and pay any real property transfer taxes and any recording
fees associated with the transfer of the Property. Assignee agrees to be solely
responsible for any and all sales taxes, if any, due on equipment, material and
property hereby assigned and sold, and Assignee shall remit such sales taxes to
the proper taxing authority.
Assignee agrees to perform all operations in compliance with all applicable
Local, State, Indian and Federal laws, orders, rules and regulations, and to
observe, perform and abide by all of the lease terms and provisions, express and
implied, applicable to Assignor's interest in the Property. Assignee further
acres to secure the bonds, permits and other documents as required by the
appropriate regulatory authority which are necessary to effectuate the transfer
of interests hereby and to cause the release of Assignor's continued liability
as lessee or operator.
Assignee accepts this transfer of the Properties subject to any and all
covenants in instruments in the chain of title and to any outstanding
agreements, whether recorded or not, which may include, but is not limited to,
agreements for options, leases, permits, rights-of-way, easements, water
disposal systems, licenses, operating agreements and production sales
agreements; and in this regard, Assignee assumes all duties and obligations
associated with said outstanding agreements, including, but not limited to, all
of Assignor's rights and obligations associated with said outstandin-g
agreements, including, but not limited to, all of Assignor's rights and
obligations in and for any gas sales, production or transportation imbalances,
whether as a result of overproduction or underproduction by Assignor.
This Assignment, Bill of Sale and Conveyance shall be binding upon and
inure to the benefit of the heirs, successors, personal representatives and
assigns of the respective parties hereto.
This Assignment, Bill of Sale and Conveyance is subject to the terms and
conditions, including, but not limited to, the assumptions and indemnifications,
contained in that certain Purchase and Sale Agreement dated
Assignor warrants title to the Properties, as against all parties
claiming by, through, or under Seller, but not otherwise.
- -EXECUTED this ___ day of ___________, 19__, but effective as of the Effective
Time.
ASSIGNOR:
Taurus Operating, Inc.
By:
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ASSIGNEE:
------------------------------------------------------------
By:
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--------------------------------------------------------
THE STATE OF []
------------------
[]
COUNTY OF []
----------------
This instrument was acknowledged before me on the _____ day of
________________, 1998, by _______________________, as President of Taurus
Operating, Inc.
---------------------------------------------------
Notary Public, State of Texas
My Commission Expires: Notary's Name Printed:
- -------------------------- ---------------------------------------------------
THE STATE OF []
------------------
[]
COUNTY OF []
----------------
This instrument was acknowledged before me on the _____ day of
________________, 1998, by _______________________, as ______________________ of
_____________________.
---------------------------------------------------
Notary Public, State of Texas
My Commission Expires: Notary's Name Printed:
- -------------------------- ---------------------------------------------------
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